A
An account deficit refers to a negative balance in a country’s trade or payments. This occurs when a country imports more goods and services than it exports, or when its outflows (such as payments to foreign investors or government debt servicing) exceed its inflows. A persistent account deficit can lead to increased foreign borrowing and may affect a country’s currency valuation, as the demand for foreign currencies exceeds the demand for the domestic currency. Traders monitor account deficits as they can signal economic vulnerabilities and potential shifts in currency value.
Accrual in finance refers to the method of recognizing revenues and expenses when they are incurred, regardless of when the actual cash flow occurs. Specifically, in foreign exchange (FX) markets, accruals are often used to refer to the apportionment of premiums and discounts on forward exchange contracts that relate directly to deposit swap deals (interest arbitrage). These accruals are spread over the duration of the contract and can impact the pricing of future deals. The accrual accounting method helps provide a more accurate representation of a company’s financial position and performance.
An acquisition happens when one company purchases another, gaining control over its operations, assets, or brand. This can be done by buying a majority or full ownership stake. Acquisitions are common in business and finance, often used to expand market share, eliminate competition, or enter new industries.
An adjustment in finance often refers to the change in the value of a financial asset due to certain events, such as the payment of dividends. Specifically, when a company pays out dividends, the share price usually takes a dip on the ex-dividend date. This is because money flows out of the company to shareholders, reducing the company’s net value. The price adjustment occurs at the close of business on the day before the ex-dividend date. Traders must account for these adjustments, as they affect the short-term price movements and impact strategies around dividend-paying stocks.
Trading alerts notify traders when specific market conditions are met, allowing them to react quickly to price movements. There are three main types of alerts. Economic alerts inform traders about key economic events such as interest rate decisions or employment reports. Price alerts notify traders when an asset reaches a predefined price level, helping them manage entries and exits. Indicator alerts signal when technical indicators, such as moving averages or RSI, hit a certain threshold, providing insight into potential market trends.
Alpha measures an investment’s performance relative to a market benchmark, usually a stock index. A positive alpha means the investment has outperformed the market, while a negative alpha indicates underperformance. Traders and investors use alpha to assess the effectiveness of their strategies and determine whether their returns justify the risks taken. Hedge funds and portfolio managers aim to generate high alpha by selecting assets that are expected to perform better than the overall market.
Amortisation is the gradual repayment of a loan or the systematic reduction of an intangible asset’s cost over time. When applied to loans, it refers to scheduled payments that cover both principal and interest, typically spread over months or years. In accounting, amortisation also applies to intangible assets such as patents, trademarks, and goodwill, where the cost is allocated over its useful life to reflect depreciation in value.
An annual general meeting is a yearly event where a company’s shareholders and board of directors meet to review financial performance, discuss company strategy, and vote on key business decisions. It provides shareholders with insights into the company’s progress and allows them to raise concerns or approve policies. The AGM typically includes presentations on earnings, leadership updates, and discussions on dividends, governance, and future plans.
Appreciation in finance refers to the increase in the value or price of an asset over time. For example, capital appreciation occurs when the value of an investment such as stocks, property, or commodities rises. In currency markets, appreciation occurs when a currency strengthens against another currency, often due to strong economic performance, interest rate differentials, or market sentiment. For stocks, a company’s improved financial performance or investor confidence can cause the stock price to appreciate. On the other hand, if a company’s performance worsens, the stock could depreciate, impacting investor sentiment negatively.
Arbitrage is a trading strategy that involves buying and selling an asset simultaneously in different markets to profit from price discrepancies. Traders take advantage of differences in exchange rates, stock prices, or commodity prices across different platforms or geographic locations. This practice helps ensure that prices remain balanced across financial markets, as arbitrage opportunities are quickly exploited. Institutional traders often use automated systems to detect and execute arbitrage trades instantly.
Asian Central Banks are the central monetary authorities of countries in Asia. These institutions manage national monetary policies, foreign exchange reserves, and interest rates, significantly impacting their domestic economies and global markets. With trade surpluses increasing, these central banks have become key players in global finance, accumulating vast reserves of foreign currency. Their activities, such as interventions in the foreign exchange market, can significantly influence currency exchange rates and short-term market trends, making them essential to watch for forex traders.
The Asian trading session refers to the time period from 23:00 to 08:00 GMT, during which the forex market sees significant activity from Asian markets, particularly from Tokyo and Sydney. During this time, liquidity tends to be lower compared to the European and U.S. sessions, but large price moves can still occur, especially with major currencies like the Japanese yen and the Australian dollar. Traders focus on this session for opportunities to capitalize on news events, market trends, and volatility that may arise as the Asian markets open.
The ask price is the lowest price at which a seller is willing to sell an asset or security. It represents the price a trader must pay to buy an asset in the market. The difference between the ask price and the bid price, which is the highest amount a buyer is willing to pay, is known as the bid-ask spread. A narrower spread usually indicates high liquidity, while a wider spread can signal lower trading activity.
An asset class is a group of financial instruments that share similar characteristics and behave in a comparable way in the market. The main asset classes include stocks, bonds, commodities, currencies, and real estate. Each asset class has its own risk and return profile, making diversification across multiple asset classes a key strategy for risk management. Traders and investors choose asset classes based on their investment goals, time horizon, and risk tolerance.
An asset is any resource with economic value that can be owned or controlled to generate a return. In trading, assets refer to financial instruments such as stocks, bonds, forex, commodities, and derivatives. Assets are classified into tangible assets, which have physical form, such as gold and real estate, and intangible assets, which include intellectual property and financial contracts. The value of an asset fluctuates based on supply and demand, market conditions, and economic trends.
At Best – “At best” is an instruction given to a broker to buy or sell an asset at the best available price at a specific time. This type of order allows traders to enter or exit the market quickly without specifying a fixed price. While the price at which the order is executed may vary based on market conditions, the goal is to obtain the most favorable price available at that moment. Traders use this instruction to ensure they don’t miss opportunities due to price fluctuations.
At or Better – “At or better” is a type of order instruction that directs a broker to buy or sell an asset at the specified price or a better price. This ensures that a trader does not pay more than a set price when buying, or receive less when selling. It is a common order type used in markets to ensure that a transaction occurs only if the price is favorable, providing greater control over execution, particularly for traders who aim to protect their positions from unfavorable price movements.
At the Money (ATM) – At the money is a term used in options trading to describe a contract where the strike price is equal to the current market price of the underlying asset. At the money options attract high trading activity because they are close to becoming profitable. Traders use ATM options for various strategies, including hedging and speculation, as they offer a balance between risk and reward compared to in-the-money or out-of-the-money options.
An auction is a trading mechanism where buyers and sellers submit competing bids and offers for an asset. In a traditional auction, the highest bidder wins the asset. In financial markets, auction-based trading is commonly used in stock exchanges, bond markets, and commodity trading, where prices are determined based on supply and demand. Auctions can be conducted manually or electronically, with some markets operating continuous auctions throughout the trading day.
The AUS 200, or ASX 200, refers to the Australian Securities Exchange (ASX) index of the top 200 companies by market capitalization that are listed on the Australian stock exchange. The index is a key indicator of the health of the Australian stock market and is commonly used by traders and investors to gauge the performance of major sectors within the Australian economy. The AUS 200 is closely followed by traders for opportunities in sectors such as mining, energy, and banking, which have a significant influence on the Australian economy.
“Aussie” is a colloquial term for the AUD/USD currency pair, representing the exchange rate between the Australian dollar (AUD) and the U.S. dollar (USD). It is a widely traded pair in the forex market, especially popular for its liquidity and the influence of commodity prices, particularly metals and energy. Traders often refer to the “Aussie” when discussing the broader movements in the Asia-Pacific economy, as the Australian dollar is heavily influenced by trade relationships, interest rates, and global market trends.
Automated trading, also known as algorithmic trading, is the use of computer programs to execute trades based on predefined rules and strategies. These algorithms analyze market conditions, detect trading opportunities, and place orders automatically without human intervention. Automated trading is widely used by institutional investors and hedge funds to increase efficiency, reduce errors, and capitalize on market movements with high-speed execution. Retail traders can also use automated systems through trading platforms that offer algorithmic trading tools and bots.
Averaging Down or Averaging Up
Averaging down or averaging up refers to the strategy of adjusting your position in a stock by buying more shares at a different price to adjust your cost basis. Averaging down involves purchasing more shares at a lower price when the price drops, lowering the average cost of your position. This can help recover losses, but it also increases exposure to a declining stock. Averaging up, on the other hand, means buying more shares at a higher price, increasing your position’s average cost. While averaging down can be risky, especially if the stock continues to decline, averaging up is often considered a more cautious approach, as it reflects confidence in a rising market.
B
The balance of trade, also known as the trade balance, is the difference between the value of a country’s exports and the value of its imports over a specific period. A positive balance occurs when a country exports more than it imports, resulting in a trade surplus, while a negative balance, or trade deficit, happens when imports exceed exports. The balance of trade is a key indicator of a country’s economic health and can influence currency exchange rates. A persistent trade deficit may lead to a depreciation of the country’s currency, while a trade surplus can support the currency’s value.
The Bank of China (BOC) is one of the largest and most prominent state-owned commercial banks in China. It is a subsidiary of the People’s Bank of China, which is the country’s central bank. Despite being a subsidiary, the Bank of China operates independently in various aspects, especially in managing its international business. The BOC plays a crucial role in facilitating foreign exchange, international trade, and investment activities in China and around the world. It also provides a range of services, including loans, deposits, and wealth management.
The Bank of England (BoE) is the central bank of the United Kingdom and is responsible for overseeing the country’s monetary policy, issuing currency, and maintaining financial stability. Located in the City of London, the BoE serves as the government’s bank and the lender of last resort. It plays a vital role in managing inflation, setting interest rates, and ensuring financial market stability. Similar to the Federal Reserve in the United States, the Bank of England’s policies have a significant impact on both the domestic and global economy, influencing interest rates, currency values, and financial markets.
The Bank of Japan (BOJ) is Japan’s central bank and is responsible for controlling monetary policy, issuing currency, and maintaining the stability of the financial system. The BOJ plays a central role in economic research, providing economic data, forecasts, and analysis to the public. It also oversees Japan’s banking system, ensuring its soundness and liquidity. Unlike some other central banks, the BOJ is not fully independent from the Japanese government, and its policies are closely aligned with government objectives to ensure economic growth and financial stability. Its headquarters are located in Tokyo.
A bar chart is a type of graphical representation used in technical analysis, consisting of bars that represent price movements over a specific time frame. Each bar displays four key data points: the highest price (high), the lowest price (low), the opening price (opening), and the closing price (closing). The vertical line of the bar shows the range between the high and low prices, while horizontal lines to the left and right indicate the opening and closing prices, respectively. Bar charts are used by traders to identify trends, reversals, and market sentiment, offering a clear visual representation of price movement within a given time period.
A barrier level is a significant price point that plays a key role in the structure of a barrier option, a type of financial derivative. Barrier options are activated or deactivated when the underlying asset reaches or crosses a predetermined price, known as the barrier level. These options can be used to speculate on the future direction of an asset’s price with limited risk, as they only become valid or invalid if the price hits the barrier. Traders watch these levels closely, as they can trigger significant market movements or volatility when activated.
The base currency is the first currency listed in a forex pair, representing the unit against which the value of the second currency (quote currency) is measured. For example, in the EUR/USD pair, the euro is the base currency, and the US dollar is the quote currency. In accounting and finance, the base currency also refers to the primary currency used for financial reporting by banks, businesses, or traders.
The base rate is the interest rate set by a central bank, such as the Federal Reserve or the Bank of England, which influences the cost of borrowing for commercial banks. It serves as a benchmark for setting interest rates on loans, mortgages, and savings accounts. Changes in the base rate can impact inflation, economic growth, and financial markets.
A basis point is a unit of measurement used to describe small changes in interest rates, bond yields, and other financial percentages. One basis point is equal to 0.01% or one-hundredth of a percentage point. For example, if an interest rate increases from 2.50% to 2.75%, it has risen by 25 basis points. Basis points help traders and investors quantify minor fluctuations in financial markets.
Basing is a term used in technical analysis to describe a chart pattern that indicates a period of consolidation where the supply and demand for an asset are nearly equal. During this phase, the price tends to trade within a narrow range, forming a base before a breakout. Basing can occur after a prolonged uptrend or downtrend and is often seen as a precursor to the next major price move. This pattern is important for traders as it provides potential buy or sell opportunities when the asset breaks out from the base, indicating a new trend direction.
A bear is a trader or investor who believes that the price of an asset, market, or financial instrument will decline. Bears typically sell assets short or hold defensive positions to profit from falling prices. Their outlook contrasts with bulls, who expect prices to rise.
A bear market is a prolonged period of declining prices in a financial market, typically defined as a drop of 20% or more from recent highs. Bear markets are characterized by negative investor sentiment, reduced economic activity, and a lack of confidence in future price recoveries. They can last for months or even years, depending on broader economic conditions.
Being bearish means having a negative outlook on the price movement of an asset or market. A bearish trader expects prices to decline and may take short positions, use options strategies, or seek safe-haven assets to hedge against losses. The opposite of bearish is bullish, which reflects an expectation of rising prices.
The bid is the maximum price a buyer is willing to pay for an asset or security. It represents the demand side of a trade, and the difference between the bid and the ask price is known as the bid-ask spread. A narrower spread generally indicates higher liquidity, while a wider spread suggests lower trading activity or higher volatility.
The bid/ask spread is the difference between the highest price a buyer is willing to pay for an asset (the bid price) and the lowest price a seller is willing to accept (the ask price). This spread is a key indicator of liquidity in a market: a smaller spread typically means higher liquidity and tighter competition between buyers and sellers, while a wider spread suggests lower liquidity and higher volatility. The spread can vary depending on market conditions and the asset being traded. For example, more volatile markets or less liquid assets tend to have wider spreads. Traders, especially scalpers, must account for the cost of the spread when making multiple trades over a short period.
A black box refers to a trading system or strategy that is based on complex mathematical models, algorithms, or proprietary software that is not publicly disclosed. These systems are often used by quantitative traders who rely on statistical models to make trading decisions. The term “black box” suggests that the internal workings of the system are opaque and not visible to outsiders, making it difficult for traders to understand or replicate the strategy. Black box systems are commonly employed by hedge funds, institutional investors, and high-frequency traders to exploit market inefficiencies.
Blue-chip stocks are shares of large, well-established, and financially stable companies with a strong reputation and a long track record of consistent performance. These companies typically have a dominant market position, generate steady revenues, and are included in major stock indices such as the S&P 500 or FTSE 100. Blue-chip stocks are often considered safe investments, though their growth potential may be lower than smaller, high-risk companies.
BoE is the abbreviation for the Bank of England, the central bank of the United Kingdom. It is responsible for setting monetary policy, issuing currency, regulating financial institutions, and maintaining economic stability. The BoE plays a key role in influencing interest rates and inflation through its policy decisions.
Bollinger Bands are a popular technical analysis indicator used to assess market volatility and potential price reversals. They consist of three lines: a simple moving average (SMA) in the middle, and an upper and lower band plotted two standard deviations away from the SMA. When prices approach the upper band, an asset may be overbought, while movement toward the lower band may indicate oversold conditions. Bollinger Bands help traders identify trend strength, breakouts, and potential reversals.
Bonds are fixed-income investments where investors lend money to governments, corporations, or municipalities in exchange for periodic interest payments and the return of the principal amount at maturity. Government bonds, such as U.S. Treasury bonds, are generally considered low-risk, while corporate bonds can offer higher returns but carry greater credit risk. Bonds are used for portfolio diversification, steady income, and capital preservation.
Book value represents the net worth of a company based on its financial statements, calculated as total assets minus liabilities. It reflects what a company is worth according to its accounting records, rather than its stock market valuation. Book value is often compared to market value to determine whether a stock is overvalued or undervalued.
Borrowing refers to the process of taking shares from a broker to short a stock. In short selling, traders borrow shares of a stock they don’t own and sell them at the current market price, hoping to buy them back later at a lower price. This practice allows traders to profit from falling prices. However, brokers must have the shares available for borrowing, and IPO stocks are typically unavailable for shorting because the shares have not yet been made available to borrow. Borrowing for short selling involves additional risks, including the potential for unlimited losses if the stock price rises unexpectedly.
Brent crude is a major benchmark for global oil prices, used in trading oil futures and contracts. It is sourced from the North Sea and is considered a high-quality, light crude oil with low sulfur content. Brent crude prices influence energy markets, fuel costs, and economic policies worldwide. Other key oil benchmarks include West Texas Intermediate (WTI) and Dubai/Oman crude.
A broker is an individual or company that facilitates financial transactions by executing trades on behalf of clients. Brokers operate in various markets, including stocks, forex, commodities, and real estate. They earn revenue through commissions, spreads, or fees for providing trading platforms, research tools, and market access. Some brokers are full-service, offering investment advice, while others operate as discount brokers with lower fees and self-directed trading options.
The term “buck” is a slang expression for one US dollar. The term dates back to the 18th century, when “buckskins” (the hides of deer) were used as a unit of trade in North America, especially in the frontier regions. Over time, “buck” came to be used as a common term for a dollar in American English. The use of “buck” remains widespread today, particularly in informal contexts, as a casual reference to the US dollar in both financial and everyday conversations.
The Bundesbank is the central bank of Germany, established in 1957. It is one of the most influential central banks in the European Union and a key member of the European System of Central Banks (ESCB). The Bundesbank is responsible for ensuring the stability of the German currency, the euro, and for conducting monetary policy within the framework set by the European Central Bank (ECB). Located in Frankfurt, Germany, the Bundesbank plays a crucial role in the European monetary system, managing interest rates, inflation, and economic stability in the region.
A bull is a trader or investor who believes that the price of a market, asset, or financial instrument will rise. Bulls buy and hold assets with the expectation of capital appreciation. Their outlook contrasts with bears, who anticipate price declines. Bullish sentiment often drives strong market momentum and optimism.
A bull market is a sustained period of rising asset prices, usually characterized by investor optimism, strong economic growth, and increasing demand. Bull markets occur in stocks, commodities, and other financial markets and can last for months or years. A bull market is the opposite of a bear market, which involves prolonged price declines.
The Bundesbank is the central bank of Germany, established in 1957. It is one of the most influential central banks in the European Union and a key member of the European System of Central Banks (ESCB). The Bundesbank is responsible for ensuring the stability of the German currency, the euro, and for conducting monetary policy within the framework set by the European Central Bank (ECB). Located in Frankfurt, Germany, the Bundesbank plays a crucial role in the European monetary system, managing interest rates, inflation, and economic stability in the region.
Buying refers to acquiring ownership of a financial instrument, such as stocks, commodities, forex pairs, or other assets. Traders and investors buy assets with the expectation that their value will increase over time, allowing them to sell for a profit. In financial markets, the buy price is determined by the ask price set by sellers.
“Buy the dips” is a popular trading strategy that involves purchasing an asset when its price falls temporarily after a period of upward movement, also known as a “dip.” The idea is to capitalize on a brief price decline during an overall bullish trend, with the expectation that the price will rise again. This strategy works best in markets where long-term growth trends are expected, and traders aim to buy at a lower price point during brief pullbacks. By buying the dips, traders can enhance their positions while minimizing risk during market corrections.
C
Cable is the nickname for the GBP/USD currency pair in forex trading. It represents the exchange rate between the British pound and the US dollar. The term originates from the 19th century when exchange rates between London and New York were transmitted via transatlantic cable. GBP/USD is one of the most liquid and actively traded currency pairs in the forex market.
CAD is the currency code for the Canadian dollar, commonly known as the “Loonie” due to the image of a loon bird on Canada’s one-dollar coin. It is managed by the Bank of Canada and frequently traded in forex markets as part of major pairs like USD/CAD, GBP/CAD, and EUR/CAD. The Canadian dollar is often classified as a “commodity currency” due to its strong correlation with global commodity prices, particularly oil and natural resources.
A call option is a financial contract that gives the buyer the right, but not the obligation, to purchase an asset at a predetermined price (strike price) before or on a specific expiration date. Call options gain value when the price of the underlying asset increases, making them popular for bullish strategies. They are commonly used in stock, forex, and commodity markets for hedging or speculative purposes.
A candlestick chart is a widely used price chart in trading that displays an asset’s open, high, low, and close prices for a specific period. It visually represents market sentiment, with green or white candlesticks indicating rising prices (bullish) and red or black candlesticks signaling falling prices (bearish). Originally developed in Japan during the 18th century, candlestick charts provide traders with key patterns and signals for technical analysis.
Capitulation occurs when traders or investors give up on trying to recover losses and liquidate their positions. This typically happens during extreme market downturns, where heavy selling pressure drives prices lower. Capitulation is often seen as a potential market bottom, as it signals a transition from panic selling to potential stabilization or reversal.
A carry trade is a strategy where traders borrow in a low-interest-rate currency and invest in an asset or currency with a higher interest rate. The goal is to profit from the interest rate differential, known as the “carry.” Forex traders frequently use this strategy by going long on high-yielding currencies while shorting low-yielding ones. While carry trades can be profitable, they also carry risks if exchange rates move unfavorably.
A cash market, also known as a spot market, is where financial instruments such as stocks, commodities, and forex are bought and sold for immediate delivery. Unlike futures markets, where transactions are settled at a later date, cash market transactions require full payment and settlement at the time of purchase. Cash markets operate on regulated exchanges, such as stock markets, or through over-the-counter (OTC) trading.
A central bank is a financial institution responsible for managing a country’s monetary policy, regulating banks, issuing currency, and maintaining financial stability. Central banks, such as the Federal Reserve (Fed) in the U.S. and the European Central Bank (ECB), influence interest rates and inflation through monetary policies that impact financial markets, currency valuations, and economic growth.
A chargeable gain is the profit made from selling an asset at a higher price than its purchase cost. The gain is calculated as the difference between the buying and selling price of the asset. In financial markets, most trading profits, whether from buying (going long) or selling (going short), are subject to capital gains tax (CGT), depending on the jurisdiction.
A chartist is a trader or analyst who relies on price charts and technical indicators to predict future market movements. Chartists use various tools, such as trend lines, support and resistance levels, and candlestick patterns, to identify trading opportunities. While chartists primarily focus on technical analysis, some also incorporate fundamental factors into their trading strategies.
A choppy market is one where price movements are erratic and lack a clear trend. Prices fluctuate within a range without forming a consistent upward or downward pattern. Choppy markets often occur when buyers and sellers are evenly matched, leading to unpredictable swings. Traders may use range-bound strategies to profit in choppy markets, but trending conditions typically offer better opportunities.
Circuit breaker halts are temporary suspensions in trading that occur when the price of a stock moves too drastically within a short time. These halts are designed to prevent panic selling and ensure market stability. The rules for triggering a circuit breaker vary depending on the extent of price movement and the exchange, but they typically occur when a stock drops by a significant percentage in a short period. During a circuit breaker halt, traders are unable to buy or sell the stock until the halt is lifted. This pause allows traders to assess market conditions and helps prevent further volatility.
Clearing is the process of finalizing and settling financial transactions between buyers and sellers. It ensures that trades are accurately recorded, payments are processed, and assets are delivered. Clearing is handled by clearing houses, which act as intermediaries to reduce counterparty risk in financial markets.
A clearing house is a financial institution that facilitates and guarantees trade settlements between buyers and sellers. It ensures that both parties meet their obligations and minimizes counterparty risk by acting as a neutral third party. Clearing houses play a crucial role in derivatives, futures, and stock exchanges by maintaining financial stability and reducing default risks.
A closed position refers to a completed trade where a trader has exited a market by taking the opposite action of their original trade. If a trader initially bought an asset (long position), they must sell it to close the position. If they initially sold an asset (short position), they must buy it back to close the trade. Closing a position locks in profits or losses and updates the trader’s account balance.
Collateral is an asset pledged as security for a loan or financial obligation. If the borrower defaults, the lender has the right to seize the collateral to recover the loan amount. Common types of collateral include real estate, stocks, bonds, and cash. In trading, collateral is often required for margin accounts to cover potential losses.
The closing price is the final price at which an asset was traded before the market closes on a given trading day. It serves as a key reference point for tracking price movements over time. Traders and analysts compare closing prices with previous days’ data or opening prices to assess market trends, momentum, and volatility.
Commission is the fee charged by a broker or financial institution for executing trades on behalf of a trader or investor. Commission rates vary based on the broker, asset class, and trading volume. Some brokers charge a fixed fee per trade, while others use a percentage-based commission structure. In forex and CFD trading, commissions may be embedded in the spread or charged separately.
A commodity is a basic, physical good that can be traded and used as raw material in production. Commodities are classified into two main types: hard commodities, such as gold, oil, and natural gas, which are extracted or mined, and soft commodities, such as wheat, coffee, and sugar, which are grown or cultivated. Commodities are traded on futures exchanges and play a key role in global trade and economic stability.
Components refer to the individual currency pairs that form a cross-currency trade. For example, EUR/JPY is derived from the USD/JPY and EUR/USD pairs, which are its components. Traders may use component analysis to understand the movement of cross-currency pairs by observing their underlying USD pairs.
COMPX is the ticker symbol for the NASDAQ Composite Index, which tracks the performance of more than 3,000 technology and growth-oriented stocks listed on the NASDAQ exchange. It serves as a benchmark for the tech sector and overall market sentiment.
A consolidating market occurs when an asset’s price moves within a defined range without establishing a clear uptrend or downtrend. This period of indecision often follows a strong price move and can precede a breakout in either direction. Traders look for consolidation patterns, such as triangles or rectangles, to anticipate potential breakouts.
Construction spending measures the total investment in residential and non-residential construction projects over a given period. It is an economic indicator that reflects infrastructure development and business expansion. Higher construction spending often signals economic growth, while a decline may indicate economic slowdown.
Contagion refers to the spread of financial instability from one market or economy to another. For example, an economic crisis in one country can trigger sell-offs in global markets as investors react to uncertainty. Contagion is commonly observed during banking crises, sovereign debt issues, or currency devaluations.
Contracts for Difference (CFDs)
Contracts for difference, or CFDs, are financial derivatives that allow traders to speculate on price movements without owning the underlying asset. CFD trading involves buying or selling contracts based on the asset’s price difference between the opening and closing of the trade. CFDs are available for stocks, indices, forex, commodities, and cryptocurrencies, providing leverage and flexibility, but also carrying high risk.
Contract size refers to the standardized quantity of an asset that makes up a futures, options, or forex contract. In forex trading, a standard contract (lot) is typically 100,000 units of the base currency. In stock options, one contract usually represents 100 shares. Knowing contract sizes helps traders manage risk and position sizing effectively.
Controlled risk refers to trading strategies that limit the maximum potential loss on a trade. This is often achieved using guaranteed stop-loss orders, which automatically close a position at a pre-set price regardless of market volatility. Controlled risk trading helps traders manage uncertainty and protect capital.
Convexity is a measure used in bond trading to assess how the price of a bond responds to changes in interest rates. It reflects the degree to which bond prices fluctuate as interest rates rise or fall. Higher convexity means a bond’s price is more sensitive to interest rate movements, which is crucial for investors managing fixed-income portfolios and interest rate risk.
Corporates refer to large companies that engage in financial markets for hedging or investment purposes rather than short-term speculation. Corporate trading activity can influence forex and commodities markets, as businesses seek to manage currency risk or secure raw materials. Unlike speculative funds, corporate interests are typically long-term and less reactive to short-term price movements.
The counter currency is the second currency in a currency pair quotation. For example, in the EUR/USD pair, the USD is the counter currency, while the EUR is the base currency. The exchange rate indicates how much of the counter currency is needed to purchase one unit of the base currency.
A counterparty is the other participant in a financial transaction. Every trade requires a counterparty, whether in stocks, forex, or derivatives markets. In over-the-counter (OTC) markets, counterparties can be banks, financial institutions, or individual traders. Counterparty risk arises when one party fails to fulfill their financial obligations.
Country risk refers to the potential financial losses arising from economic, political, or regulatory conditions in a specific country. Investors assess country risk before engaging in cross-border transactions to mitigate exposure to currency fluctuations, sovereign debt defaults, or geopolitical instability.
Cost of carry refers to the expenses incurred to maintain a trading position over time. In leveraged trading, such as forex and futures, this includes overnight funding fees, interest on margin accounts, and storage costs for physical commodities. Traders factor in the cost of carry when holding positions long-term to ensure profitability.
A covered call is an options trading strategy where an investor holds a long position in an asset while simultaneously selling a call option on the same asset. This strategy generates income from the option premium while limiting potential upside gains. It is commonly used in stock trading to enhance returns in a sideways or mildly bullish market.
The Consumer Price Index (CPI) is a key measure of inflation that tracks changes in the price of a basket of goods and services over time. CPI data influences central bank policies and interest rate decisions, as rising inflation often leads to tighter monetary policy to stabilize prices.
Crown currencies refer to the currencies of Commonwealth nations, including the Canadian dollar (CAD), Australian dollar (AUD), British pound (GBP), and New Zealand dollar (NZD). These currencies are often influenced by commodity prices and global trade flows.
Crystallisation refers to the process of selling an asset to realize capital gains or losses. Before an asset is sold, any increase or decrease in value remains unrealized, meaning it exists only on paper. Once the position is closed, the gain or loss is crystallized and may be subject to capital gains tax. Investors may use crystallisation strategies for tax planning or portfolio rebalancing.
Currency appreciation occurs when one currency increases in value relative to another in a forex pair. This can happen due to factors such as strong economic growth, higher interest rates, or increased demand for a country’s goods and services. A stronger currency makes imports cheaper but can reduce the competitiveness of exports.
Currency depreciation is the decline in a currency’s value relative to another currency in a floating exchange rate system. Depreciation occurs when market forces such as lower demand, economic weakness, or government policies reduce a currency’s purchasing power. A depreciated currency can make exports more competitive but raises the cost of imports.
Currency futures are standardized contracts traded on exchanges that specify the price at which a currency can be bought or sold on a future date. Unlike spot forex trading, where transactions settle immediately, currency futures allow traders to hedge against exchange rate fluctuations or speculate on currency movements. These contracts have fixed expiration dates and contract sizes.
A currency peg is a monetary policy where a country’s central bank fixes its currency’s exchange rate to another currency or a basket of currencies. Pegging helps maintain stability in international trade and investment by reducing currency fluctuations. Some countries peg their currency to the US dollar, while others use a fixed exchange rate system linked to commodities like gold.
D
Dark pools are private trading venues where institutional investors can buy or sell large quantities of stocks without publicly disclosing trade details. These off-exchange networks help minimize market impact by preventing large orders from affecting asset prices before the trade is completed. While dark pools offer benefits like reduced price slippage and anonymity, they have also raised concerns about market transparency.
A day order is a trading instruction to buy or sell an asset that remains active only for the duration of a single trading day. If the order is not executed by the market’s close, it is automatically canceled. Day orders are commonly used in stock and forex trading to ensure that traders do not hold unintended positions overnight.
Day trading is a trading strategy where positions are opened and closed within the same trading day. The goal is to capitalize on short-term price movements without holding assets overnight. Day traders rely on technical analysis, market trends, and price momentum to make quick decisions. This style of trading requires discipline, a solid strategy, and real-time market monitoring.
A deal, also referred to as a trade, is any transaction executed in the forex market. The most common type of deal is a spot contract, where a foreign exchange transaction is conducted based on the current market rate. However, deals can also include forward contracts, where the exchange rate is set for a future transaction date, and other variations like window forwards, limit orders, stop-loss orders, and forex swaps. In essence, a deal represents the exchange of one currency for another, or the purchase and sale of a financial instrument, based on the terms agreed upon by the parties involved.
A dealer is a financial institution, typically a bank, that engages in the trading of foreign currencies and other financial instruments. Dealers act as intermediaries between buyers and sellers in the market, facilitating liquidity by buying and selling on their own account. They work with their country’s regulatory bodies and help maintain the bid and ask prices for various currency pairs. Dealers play an essential role in ensuring that markets function smoothly, and they are often responsible for managing large volumes of transactions in both domestic and international markets.
The dealing spread, also known as the bid/ask spread, is the difference between the price at which a dealer is willing to buy a currency (the bid price) and the price at which they are willing to sell it (the ask price). This spread is a key indicator of market liquidity and volatility. In volatile markets, the spread tends to widen due to increased uncertainty, while in stable markets, the spread narrows. For traders, the dealing spread represents a cost of entry and exit from a position, and it’s particularly important for those engaging in high-frequency trading strategies, like scalping.
A debenture is a type of debt instrument issued by companies or governments to raise capital. In the UK, debentures allow lenders, such as banks, to secure loan repayments against a borrower’s assets, even in cases of default. Unlike secured loans, some debentures are unsecured and rely solely on the issuer’s creditworthiness. Debentures typically offer fixed interest payments to investors.
Defending a level refers to the actions taken by traders or institutional players to prevent an asset’s price from crossing a certain critical threshold. This typically happens when a trader has a vested interest in maintaining the price within a specific range. For example, in the case of barrier options, defending a level might involve executing trades to keep the price from triggering a barrier event. Traders often use this strategy in markets where they hold significant positions, as defending a price level can help protect their investments from sudden, large losses.
A deficit occurs when expenditures exceed income or revenue. In the context of international trade, a trade deficit happens when a country imports more goods and services than it exports. A government budget deficit occurs when a country’s spending surpasses its income from taxes and other sources. Similarly, a fiscal deficit happens when a government’s debt rises faster than its revenue generation. Governments often run deficits during times of economic downturn to stimulate growth or to finance large public projects, but persistent deficits can lead to inflationary pressure and unsustainable levels of debt.
Delisting refers to the removal of a security from a stock exchange. A company can be delisted either voluntarily or involuntarily. Voluntary delisting occurs when a company decides to no longer be publicly traded, often due to mergers, acquisitions, or a shift to private ownership. Involuntary delisting happens when a company fails to meet the listing requirements of the exchange, such as minimum share price or market capitalization thresholds. Delisting can affect a company’s ability to access capital and can lead to a decrease in liquidity for its shares.
Delta is a key options trading metric that measures how much the price of an options contract changes in response to a one-unit move in the underlying asset. It ranges from 0 to 1 for call options and -1 to 0 for put options. Delta also represents the probability of an option expiring in the money and is sometimes referred to as the hedge ratio.
The deposit rate is the interest rate paid by banks or financial institutions on deposits made by customers, such as savings accounts, checking accounts, or money market accounts. The deposit rate compensates depositors for keeping their funds in the bank and is a key tool used by central banks to influence economic activity. Higher deposit rates typically encourage savings, while lower rates are designed to stimulate borrowing and spending. Traders monitor changes in deposit rates as they can indicate shifts in monetary policy or the broader economic environment.
Depreciation refers to the decrease in value of an asset, particularly in relation to currencies. Currency depreciation happens when a country’s currency loses value relative to others, often due to economic factors like a weak economy, inflation, or changes in market sentiment. For example, a country with a high trade deficit may experience currency depreciation as demand for foreign currency exceeds the demand for the domestic currency. In the context of fixed assets, depreciation is the reduction in the value of tangible assets over time due to factors such as wear and tear, age, or obsolescence.
A derivative is a financial instrument whose value is derived from an underlying asset, such as stocks, commodities, currencies, or interest rates. Derivatives include options, futures, contracts for difference (CFDs), and swaps. Traders use derivatives to hedge risks, speculate on price movements, or gain leveraged exposure to financial markets without owning the actual asset.
A digital option, also known as a binary option, is a type of options contract that offers a fixed payout if the underlying asset’s price reaches or exceeds a pre-determined strike price at expiration. Unlike traditional options, digital options have only two possible outcomes: a set profit or a total loss. These options are commonly used for speculative trading and short-term market bets.
Direct market access (DMA) allows traders to place orders directly on an exchange’s order book without using intermediaries. This provides greater transparency, control, and speed in executing trades. DMA is commonly used by institutional traders and advanced retail traders who need access to deep liquidity and faster execution. However, it requires a thorough understanding of market dynamics and risk management.
Divergence occurs when there is a discrepancy between the price movement of an asset and a technical indicator, suggesting that the current price trend may not be sustainable. For example, if a price is rising but a technical indicator such as the Relative Strength Index (RSI) is showing a decrease, it could signal a potential reversal or correction. Divergence is a powerful tool for traders to spot potential trend reversals and adjust their strategies accordingly. There are two main types of divergence: bullish divergence (when the price makes a lower low, but the indicator makes a higher low) and bearish divergence (when the price makes a higher high, but the indicator makes a lower high).
A dividend is a portion of a company’s earnings distributed to shareholders, typically on a quarterly or annual basis. Companies that generate consistent profits may pay dividends as cash payments or additional shares. Dividend-paying stocks are attractive to investors seeking steady income and long-term value growth. The dividend yield, expressed as a percentage, helps investors compare dividend-paying stocks.
A Doji candlestick is a pattern in technical analysis that signifies indecision in the market. It occurs when the opening and closing prices of a stock or asset are nearly identical, forming a candle with a small body and long upper and lower wicks. The Doji suggests that neither buyers nor sellers have control, and it often appears at key points of trend reversals. A Doji can indicate a potential turning point, but traders usually combine it with other technical indicators to confirm its significance.
In financial markets, a “dove” refers to a policymaker, particularly a central banker, who advocates for low interest rates and supportive monetary policies aimed at boosting economic growth and reducing unemployment. Dovish policies are typically associated with the belief that the economy needs stimulus to grow, and that keeping interest rates low encourages borrowing and investment. In contrast to hawkish policies, which focus on combating inflation and tightening monetary policy, dovish policies prioritize economic expansion.
Dow Jones Industrial Average (DJIA)
The Dow Jones Industrial Average (DJIA) is one of the most well-known stock market indices, tracking the performance of 30 large, publicly traded companies in the United States. The index includes major companies from various sectors such as technology, healthcare, finance, and consumer goods. The DJIA is used as a benchmark for the overall health of the U.S. stock market and economy. Many traders and investors use the DJIA to gauge market sentiment and to track the performance of the largest companies in the U.S. economy.
A downtrend is a sustained decrease in an asset’s price over time, typically caused by bearish market sentiment, where sellers dominate the market. The characteristic feature of a downtrend is a series of lower highs and lower lows on price charts. Downtrends often occur due to changes in economic conditions, disappointing earnings, negative news, or shifts in market sentiment. Traders look for downtrends to either short the market or exit long positions. Identifying a downtrend is crucial for making informed decisions about entering or exiting the market.
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Earnings per share (EPS) is a financial metric that indicates a company’s profitability on a per-share basis. It is calculated by dividing a company’s net profit by the total number of outstanding shares. A higher EPS generally suggests stronger financial performance and can influence investor decisions. EPS is widely used to compare companies within the same industry and to assess earnings growth over time.
EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It is a financial measure used to evaluate a company’s operating performance by excluding the effects of financing decisions, tax policies, and accounting adjustments. EBITDA provides a clearer view of a company’s core profitability and is often used in business valuation and financial analysis.
EBITDAR stands for earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs. This metric is particularly useful for analyzing companies undergoing structural changes or those with significant lease expenses, such as airlines and hospitality businesses. EBITDAR helps investors assess a company’s profit potential while removing costs that may distort operational performance.
The ECB, or European Central Bank, is the central bank for the eurozone, responsible for managing monetary policy and maintaining price stability across countries that use the euro. The ECB sets interest rates, controls inflation, and implements financial policies that impact forex markets, bond yields, and economic growth in Europe.
ECNs (Electronic Communication Networks)
ECNs, or Electronic Communication Networks, are automated systems that match buy and sell orders for securities in financial markets. They serve as alternative trading platforms, offering traders the ability to trade directly with each other, bypassing traditional market makers. ECNs are typically used to facilitate after-hours trading, provide greater transparency, and reduce costs by offering faster execution and narrower spreads. Traders are often charged fees (known as “tolls”) for using these networks, which can vary depending on the ECN and the type of transaction.
An economic indicator is a statistic or piece of economic data used by analysts, traders, and investors to assess the overall health and performance of an economy. These indicators help guide decisions about investments, policy, and economic forecasting. Common examples of economic indicators include GDP growth, unemployment rates, inflation, and consumer confidence. By analyzing these indicators, traders can gauge market trends and anticipate future economic conditions, allowing for more informed trading strategies.
An End of Day Order (EOD) is a type of trade order that instructs the broker to either open or close a position, but only within the confines of the current trading day. These orders typically expire at the close of the trading session if not executed before that time. EOD orders are often used when traders want to take advantage of short-term price movements within a single trading day but want to avoid carrying positions overnight. This type of order is also known as a day order, and it helps traders manage risk by ensuring that positions are settled before the market closes.
Eastern Standard Time (EST) is a time zone used in North America, Central America, and the Caribbean, typically observed during the winter months. It is five hours behind Coordinated Universal Time (UTC) and Greenwich Mean Time (GMT). EST is the time zone for major U.S. cities like New York, Washington D.C., and Toronto. The EST time zone is crucial for traders, as the forex and financial markets’ opening hours align with it. It is also essential for scheduling trading activities, economic reports, and market news releases that impact the financial markets.
Equity represents ownership in an asset, typically referring to stocks in a company. It is the value remaining after subtracting a company’s liabilities from its total assets. In trading, equity also refers to the total value of a trader’s account, including cash and unrealized profits or losses. Investors seek to grow their equity through capital appreciation and dividends.
Equity options are derivative contracts that grant the right, but not the obligation, to buy or sell shares of a company at a predetermined price before the option’s expiration date. Traders use equity options for speculation, hedging, and income generation. Call options allow the purchase of shares, while put options provide the right to sell them.
The ESTX50 is the abbreviation for the Euro Stoxx 50, an index that includes the top 50 most highly capitalized stocks listed on the EURO STOXX. This index is weighted according to each company’s free float market capitalization and represents a broad cross-section of Europe’s largest companies. The Euro Stoxx 50 is a major benchmark for European equities and is used by traders and investors to track the performance of the Eurozone’s largest corporations. The index is particularly important for those looking to trade European markets or gauge the overall health of the European economy.
An exchange-traded fund (ETF) is a financial security that tracks the performance of a specific index, sector, commodity, or asset class. ETFs are traded on stock exchanges like individual stocks, offering diversification, liquidity, and cost efficiency. Popular ETFs track benchmarks such as the S&P 500 or gold prices, allowing investors to gain broad market exposure with a single trade.
Exchange-traded products (ETPs) are financial instruments that trade on national stock exchanges throughout the day. ETPs include ETFs, exchange-traded notes (ETNs), and exchange-traded commodities (ETCs). These products provide exposure to various asset classes, such as equities, bonds, commodities, and currencies, with the flexibility of stock-like trading.
EURIBOR (Euro Interbank Offered Rate)
EURIBOR is the benchmark interest rate at which eurozone banks offer unsecured loans to one another on a short-term basis, typically ranging from one day to one year. It is calculated daily by averaging the rates provided by a panel of major European banks. EURIBOR is crucial in financial markets as it serves as the reference rate for a wide variety of financial products, including mortgages, loans, and derivatives. A change in EURIBOR rates can indicate shifts in monetary policy, economic conditions, or market sentiment, making it a key interest rate for traders and investors to monitor.
The Euro (EUR) is the official currency used by the 19 countries in the European Union that form the Eurozone. Introduced on January 1, 1999, it replaced the national currencies of several EU member states, including the French franc, the German mark, and the Italian lira. The Euro is the second most traded currency in the world, after the US Dollar, and is widely used for international transactions, financial trading, and as a reserve currency. The Euro’s value is heavily influenced by economic indicators within the Eurozone, including inflation, unemployment rates, and monetary policy decisions made by the European Central Bank.
The European session is the second major trading session of the forex market, running from 2:30 AM to 10:30 PM EST. It is centered around the opening of European markets, with London being the most significant financial hub during this period. This session experiences the highest volume of trades, particularly due to its overlap with the Asian and North American sessions. The European session is crucial for forex traders, as it sees increased market volatility and liquidity, making it ideal for both short-term traders and those looking to capture significant market moves.
Ex-dividend refers to the period when a stock is sold without the right to receive the next dividend payment. This term is used to describe shares traded between the declaration and payment dates of dividends. When a stock goes ex-dividend, the price typically drops by the amount of the dividend, reflecting the fact that the buyer will not receive the next payout. Investors must be aware of ex-dividend dates when buying or selling dividend-paying stocks, as the timing can impact the potential return from the investment.
An exchange is a structured marketplace where financial assets such as stocks, commodities, bonds, and derivatives are bought and sold. Major exchanges include the New York Stock Exchange (NYSE), London Stock Exchange (LSE), and Chicago Mercantile Exchange (CME). Exchanges provide transparency, liquidity, and price discovery, allowing investors to trade assets efficiently.
Exchange Delivery Settlement Price (EDSP)
The exchange delivery settlement price (EDSP) is the price at which exchange-traded derivative contracts, such as futures and options, are settled upon expiration. The EDSP determines the final payout for traders holding these contracts. It is calculated using a standardized formula, often based on an asset’s average price over a specific period near expiry.
The expiry date, or expiration date, is the predetermined date on which a derivative contract, such as an options or futures contract, automatically closes. After this date, the contract becomes invalid, and any remaining value is settled. Traders must decide whether to exercise, roll over, or close their positions before expiry.
Exposure in trading refers to the amount of capital at risk in a market position. It can refer to the total value of open trades, the potential loss a trader faces, or the percentage of a portfolio allocated to a specific asset or sector. Managing exposure is key to risk management, as excessive exposure can lead to significant financial losses in volatile markets.
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FCA (Financial Conduct Authority)
The Financial Conduct Authority (FCA) is the UK’s primary financial regulator, responsible for overseeing the financial markets to ensure fairness and transparency. It was established to replace the Financial Services Authority (FSA) and now supervises a wide range of financial services, from banking to investment firms. The FCA’s role is to protect consumers by enforcing standards that prevent misconduct, promote competition, and maintain market integrity. Traders and investors can trust that the FCA’s regulations aim to create a stable, transparent financial environment.
The Federal Reserve, commonly referred to as the ‘Fed,’ is the central banking system of the United States. It is tasked with managing the country’s monetary policy, regulating banks, and maintaining financial stability. The Fed consists of twelve regional banks located in key U.S. cities, and its main objectives include controlling inflation, supporting employment, and stabilizing the financial system. The decisions made by the Fed directly influence interest rates, currency values, and overall economic conditions, making it a key player in global finance.
Fiat currency refers to a type of money that has no intrinsic value and is not backed by a physical commodity like gold or silver. Its value is derived from the trust and confidence placed in the government or central bank that issues it. Most of the world’s currencies, such as the US dollar, the euro, and the British pound, are fiat currencies. Unlike commodity money, which is linked to an underlying asset, fiat money is valuable because a government maintains its value through law and regulation. Traders should understand that the value of fiat currencies can fluctuate based on economic conditions, interest rates, and political factors.
Fibonacci retracement is a popular tool used in technical analysis to identify potential levels of support and resistance in the price movements of an asset. Based on the Fibonacci sequence, this method involves drawing horizontal lines at key Fibonacci levels—such as 23.6%, 38.2%, 50%, 61.8%, and 100%—on a price chart. These levels act as potential reversal points where prices might either bounce or continue their trend. Traders use Fibonacci retracement to predict price corrections, helping them decide when to enter or exit a trade. While not always precise, it provides traders with a framework for anticipating potential market turning points.
In trading, a “fill” refers to the completion of an order, meaning that a trade has been executed. When you place an order to buy or sell an asset, the order is “filled” when it is matched with another trader or market participant willing to take the opposite side of the transaction. The term “fill” is important because it signifies that the trade has been processed and completed. However, it’s worth noting that in fast-moving markets or during periods of low liquidity, there is no guarantee that an order will be filled at the requested price, and the fill may occur at a different price, especially with market orders.
A Fill or Kill (FOK) order is a type of market instruction that requires immediate execution of the entire order. If the order cannot be fully executed right away, it is canceled. FOK orders are typically used when a trader wants to ensure that they get the desired amount of an asset without partial fills, avoiding the possibility of a fragmented or delayed trade. This type of order is particularly important when speed and certainty are critical for a trader’s strategy, as it eliminates the risk of partial executions or missed opportunities.
“Filled at Market” refers to executing a trade at the current market price, meaning the order is immediately filled at the best available price without waiting for specific price targets or conditions. This type of order shows confidence because the trader is willing to act on the current market situation, trusting that now is the right time to enter or exit a position. By choosing to execute the trade immediately, the trader demonstrates decisiveness, showing they are not hesitant to engage with the market as it stands. It also reflects a belief in the liquidity and stability of the market, as they are confident that the current price is fair and that waiting for a better price may result in missing the opportunity altogether. In essence, a “Filled at Market” order highlights a trader’s confidence in their strategy and their ability to navigate market fluctuations quickly.
A financial analyst is a professional who evaluates financial data, market trends, and company performance to provide investment recommendations or business insights. In financial services, analysts study forex, stocks, commodities, and cryptocurrencies to assist traders and investors in making informed decisions.
A financial contract is a legally binding agreement between two or more parties outlining the rights and obligations related to a financial transaction. These contracts can involve the exchange of money, goods, or services and are commonly used in trading, lending, derivatives, and investment agreements.
A financial instrument is a broad term used to describe any contract that can be traded. These instruments represent a monetary agreement between two parties and can be bought or sold in financial markets. There are two main types: equity instruments (such as stocks) and debt instruments (like bonds). Financial instruments also include derivatives, such as options and futures contracts, which derive their value from an underlying asset. These instruments serve as tools for investors, traders, and institutions to raise capital, hedge risks, or speculate on market movements.
A financial liability is an obligation to deliver money or other financial assets. Liabilities can be classified as current liabilities, which must be settled within 12 months (such as rent, salaries, or utility bills), and non-current liabilities, which have longer repayment periods (such as long-term loans or bonds). Managing financial liabilities is crucial for maintaining financial stability.
A financial market is a marketplace where buyers and sellers come together to trade financial assets, such as stocks, bonds, commodities, and currencies. The value of these assets is determined by supply and demand, and the goal of participants is to either generate profit or manage risk. Financial markets play a critical role in facilitating the flow of capital in an economy and provide a platform for companies and governments to raise funds. The two main types of financial markets are the capital markets (which deal with long-term investments like stocks and bonds) and the money markets (which involve short-term borrowing and lending).
FIFO is an inventory and accounting method where the oldest assets or inventory are used, sold, or disposed of first. In trading and investing, FIFO applies to tax calculations, where the first securities purchased are the first to be sold, affecting the calculation of capital gains and taxable income.
A flat market occurs when an asset’s price shows little movement over time, remaining within a narrow trading range. In forex, a flat market means a currency pair is not experiencing significant fluctuations, making it challenging for traders to capitalize on trends. Flat markets often result from low trading volume or market indecision.
A flat or square position refers to a situation where a trader has closed all open positions, leaving them with no market exposure. For example, if a trader buys $500,000 worth of an asset and then sells $500,000 of the same asset, they return to a neutral or “flat” position.
A flat reading in economic data means that a particular metric, such as inflation or GDP growth, remains unchanged from the previous period. Flat readings suggest economic stability but may also indicate stagnation in certain cases.
Float refers to the total number of outstanding shares of a company that are available for public trading. This number is calculated by subtracting restricted shares and insider holdings from the total shares outstanding. A stock with a low float and high demand tends to experience higher volatility, as fewer shares are available to meet demand. The float is a crucial measure of liquidity and helps traders understand how easily a stock can be bought or sold in the market.
A floating exchange rate is a type of currency exchange rate that is determined by market forces, specifically the supply and demand for the currency relative to others. Unlike fixed or pegged exchange rates, which are set by governments or central banks, a floating exchange rate fluctuates freely based on economic conditions, trade balances, and investor sentiment. For example, the value of the US dollar can rise or fall depending on factors like inflation, interest rates, and political events. Traders need to keep an eye on floating exchange rates as they can change rapidly, impacting the value of currencies and international investments.
The Federal Open Market Committee (FOMC) minutes are detailed records of the Federal Reserve’s policy meetings, released three weeks after each meeting. These minutes provide insights into monetary policy decisions, interest rate expectations, and economic outlooks. Traders analyze them to gauge whether the Fed is adopting a hawkish (favoring higher interest rates) or dovish (favoring lower interest rates) stance.
In trading, the “force open” function allows traders to take a position in the opposite direction of an existing position on the same market. This feature is typically found in platforms that allow for more flexible risk management, enabling traders to adjust their exposure in real time. For example, if you have an open long position (betting the price will go up) and the market turns against you, using the “force open” option allows you to open a short position (betting the price will go down) to balance your risk. However, this function should be used carefully, as it can increase your exposure to market movements.
Forex, short for “foreign exchange,” refers to the global market where currencies are traded. It is the largest and most liquid financial market in the world, with a daily trading volume of over $6 trillion. Forex trading involves the exchange of one currency for another, such as buying the US dollar while selling the euro. Traders participate in forex to speculate on currency price movements, hedge risks, or facilitate international trade. The forex market operates 24 hours a day, five days a week, and is influenced by factors such as interest rates, geopolitical events, and economic data releases.
A forward contract is a customized financial agreement between two parties to buy or sell an asset at a predetermined price on a specific future date. Unlike standardized futures contracts, forward contracts are not traded on exchanges and can be tailored to meet the specific needs of the buyer and seller, such as the quantity of the asset or the delivery terms. These contracts are typically used by businesses and traders to hedge against price fluctuations in commodities, currencies, or other assets. While forward contracts offer flexibility, they also carry counterparty risk, meaning there is a chance that one party may default on the agreement.
The FRA40, or CAC 40, is a benchmark stock index representing the 40 largest companies on the Euronext Paris Exchange. It is one of Europe’s major equity indices and tracks the performance of leading French multinational corporations.
The FTSE 100 (Financial Times Stock Exchange 100 Index) is a stock market index that tracks the top 100 companies by market capitalization on the London Stock Exchange (LSE). Many of these companies operate internationally, making the FTSE 100 a less direct indicator of the UK economy compared to domestic-focused indices.
A fund is an investment vehicle that pools capital from multiple investors to invest in a diversified portfolio of assets, such as stocks, bonds, commodities, or real estate. Funds can be actively managed or passively track a market index, with objectives ranging from capital appreciation to income generation.
Fundamental analysis is a method of evaluating the intrinsic value of an asset by analyzing the economic, financial, and qualitative factors that could impact its future performance. This type of analysis focuses on the underlying health of a company, industry, or economy, looking at data such as earnings reports, interest rates, and inflation figures. For traders, fundamental analysis can provide insights into the broader market trends and help them assess whether an asset is overvalued or undervalued. It is commonly used for long-term investments, as it aims to identify the true value of an asset, regardless of short-term price movements.
A futures contract is a standardized agreement between two parties to buy or sell an asset at a specific price on a set date in the future. Futures contracts are typically used to trade commodities, financial instruments, or indices. These contracts are traded on exchanges and are often used by traders and investors to hedge against price changes or to speculate on the future price of an asset. Futures contracts have an expiration date, and the price is agreed upon in advance. These contracts are standardized, meaning that their terms are set by the exchange and cannot be customized like forward contracts.
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The G7 is an international organization consisting of seven of the world’s most advanced economies: France, Germany, Italy, Japan, the United Kingdom, Canada, and the United States. These countries collaborate on economic policy, international trade, security, and global financial stability. The G7 holds annual summits where leaders discuss issues such as climate change, monetary policy, and geopolitical concerns.
The G8 was an expansion of the G7 that included Russia from 1997 until 2014. The group served as a forum for major global economies to discuss economic and political issues. Russia was suspended from the group in 2014 following its annexation of Crimea, leading to the return of the original G7 format.
Gapping occurs when an asset’s price moves sharply from one level to another, creating a gap on a price chart. Gaps usually happen when a market opens at a price higher or lower than the previous day’s close due to overnight news or trading activity. There are two types of gaps – Partial gapping: The opening price is within the previous day’s range but above or below the prior close. Full gapping: The opening price is completely outside the previous day’s range, forming a noticeable gap on the chart. Gaps can signal strong momentum in a market but can also pose risks for traders, as they may trigger stop-loss orders unexpectedly.
The gearing ratio is a financial metric used to assess a company’s level of financial leverage. It measures the proportion of a company’s capital that comes from debt rather than equity. A high gearing ratio indicates that a company relies more on borrowed funds, which can amplify both potential returns and financial risk. Investors and analysts use this ratio to evaluate a company’s ability to meet its debt obligations and its overall financial stability.
The Germany 30 Index, also known as the DAX 30, is a stock market index representing the 30 largest publicly traded companies on the Frankfurt Stock Exchange. The index includes major German multinational firms and is a key indicator of the German economy. Prices for the index are often derived from the Xetra electronic trading system.
Greenwich Mean Time (GMT) is the global time standard from which all other time zones are measured. It is used as a reference for trading hours, economic releases, and financial markets worldwide. Coordinated Universal Time (UTC) has largely replaced GMT in scientific and financial applications, but the term is still widely used in trading.
Gold bullion refers to high-purity physical gold (typically 99.5% pure or higher) in the form of bars, ingots, or coins. Investors buy gold bullion as a hedge against inflation and economic uncertainty. It is often considered a safe-haven asset, meaning its value tends to rise during financial instability.
A gold certificate is a document that represents ownership of gold without requiring the investor to store the physical metal. It allows traders to buy and sell gold without handling storage, security, or delivery logistics. Gold certificates were historically used as a form of currency and are now issued by banks and financial institutions.
A gold contract is a standardized futures contract that allows traders to buy or sell gold at a fixed price on a future date. One contract typically represents 10 troy ounces of gold. These contracts are traded on futures exchanges, such as the COMEX (Chicago Mercantile Exchange).
A good for day (GFD) order is a trade order that remains active until the end of the trading day. If the order is not executed by the market close, it is automatically canceled. GFD orders are commonly used in intraday trading strategies.
Good ‘Til Canceled (GTC) Order
A good ‘til canceled (GTC) order is a trade instruction that remains active until the trader manually cancels it or the order is filled. Some brokers impose expiration limits, typically 90 days, after which the order is automatically removed.
A good ‘til date (GTD) order is an order that remains active until a specified future date. If the trade is not executed by that date, it is automatically canceled. GTD orders allow traders to plan trades around expected market events.
Greenback is a slang term for the U.S. dollar (USD), originating from the green color of U.S. paper currency. The term dates back to the 19th century and is commonly used in forex trading and financial markets.
A grey market allows traders to speculate on the future market capitalization of a company before it officially goes public through an initial public offering (IPO). The price of a grey market represents an estimate of the company’s expected market value at the end of its first trading day. Grey markets provide early trading opportunities for investors but carry higher risks due to the lack of publicly available financial data.
Gross domestic product (GDP) measures the total market value of all goods and services produced within a country over a given period. It is a key economic indicator used to assess a country’s economic performance. GDP growth signals a strong economy, while GDP contraction may indicate a recession. GDP can be reported as: Nominal GDP (not adjusted for inflation), Real GDP (adjusted for inflation), GDP per capita (GDP divided by the population to measure living standards).
Gross national product (GNP) measures the total value of goods and services produced by a country’s residents, regardless of location. It includes income earned abroad but excludes earnings by foreign residents within the country. GNP is used to evaluate the overall economic strength and global financial position of a country.
A guaranteed order is a type of trade order that ensures execution at the trader’s requested price, even if the market gaps. Guaranteed orders protect against unexpected price movements but may come with additional broker fees.
A guaranteed stop-loss order (GSLO) ensures that a trader’s position is closed at the exact price specified, regardless of market volatility, slippage, or gapping. Unlike regular stop-loss orders, GSLOs provide absolute protection against unexpected losses, but brokers typically charge a premium for using them.
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A Hammer candle is a candlestick pattern that occurs at the bottom of a downtrend, indicating a potential reversal or support level. It has a small body located at the top of the price range, with a long lower wick that suggests sellers pushed the price lower during the session but were unable to maintain that movement, and the price rebounded. The long wick shows that there was a strong rejection of lower prices, making it a bullish signal. Traders use this pattern to identify buying opportunities at support levels.
In trading, the term “handle” has different meanings depending on the market. In most financial markets, it refers to the whole number part of a price quote, excluding decimals. For example, if a stock is trading at $105.75, the handle is 105. In forex trading, the handle refers to the common price component shared by both the bid and ask price. For instance, if EUR/USD is quoted at 1.1050/1.1053, the handle is 1.10.
Hawks and doves are terms used in economic policy discussions to describe the stance of central bank policymakers on monetary policy. Hawks favor tighter monetary policies, such as higher interest rates, to control inflation. Doves, on the other hand, support looser monetary policies, such as lower interest rates and economic stimulus, to encourage growth. Traders and analysts monitor hawkish and dovish signals from central banks to anticipate changes in interest rates and their impact on financial markets.
A hedge is an investment or trading strategy designed to reduce risk by offsetting potential losses in another position. Hedging is commonly used in forex, stock, and commodities markets to protect against unfavorable price movements. Traders hedge by using derivatives such as options, futures, or opposite positions in correlated assets. While hedging can limit downside risk, it may also reduce potential profits.
Heikin Ashi is a type of candlestick chart used in technical analysis to smooth price fluctuations and highlight trends more clearly. Unlike standard candlestick charts, Heikin Ashi charts calculate each candlestick based on the average of the previous period’s open, close, high, and low prices. This technique helps traders filter out market noise and identify trend direction with greater clarity.
Helicopter money refers to a large-scale monetary stimulus in which a central bank prints and distributes new money directly to the public to boost economic activity. This unconventional policy is used during economic downturns or periods of low inflation when traditional monetary policies, such as interest rate cuts, are ineffective. The term originates from the idea of metaphorically dropping money from a helicopter to stimulate spending and growth.
HK50, also known as the Hang Seng Index (HSI), is a stock market index that tracks the performance of 50 of the largest companies listed on the Hong Kong Stock Exchange. It serves as a benchmark for the Hong Kong economy, representing key sectors such as finance, real estate, and telecommunications. The index is commonly used by traders to gauge the health of the Hong Kong stock market and make investment decisions. The HSI is widely followed by investors interested in the Asian market, particularly those seeking exposure to Hong Kong’s economy.
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IBOR stands for Interbank Offered Rate, a benchmark interest rate that represents the average rate at which major banks lend to each other on short-term loans, typically ranging from overnight to a year. The most well-known and widely used IBOR is LIBOR, but other variations include EURIBOR (Euro Interbank Offered Rate) and TIBOR (Tokyo Interbank Offered Rate). IBORs are used in a wide range of financial products, including over-the-counter (OTC) derivatives, loans, and bonds. They are a critical reference for determining interest rates on financial transactions and are used by traders, investors, and financial institutions to price debt and manage risks.
An illiquid market refers to a market where assets cannot be bought or sold quickly without affecting the asset’s price. This situation arises due to a lack of buyers and sellers or because the asset itself is not in demand. In an illiquid market, large transactions may have to be completed at a significant discount, meaning the seller may face a substantial loss if forced to liquidate quickly. Illiquidity can also lead to wider bid-ask spreads, further increasing the transaction costs. Traders must consider market liquidity, as it can affect the speed and cost of executing trades.
“In the money” (ITM) refers to an option that has intrinsic value. It indicates that the underlying asset’s price is favorable compared to the option’s strike price. For a call option, being in the money means the underlying asset’s price is higher than the strike price, allowing the holder to buy the asset at a lower price than the market value. For a put option, it means the asset’s price is lower than the strike price, allowing the holder to sell it for more than its current market value. In the money options have intrinsic value greater than zero, making them more likely to be exercised profitably.
An index is a statistical measure that represents the performance of a specific group of assets, typically stocks or bonds, within a particular market or sector. It is used to track the collective performance of a group of assets over time. Common examples include stock indices like the S&P 500, which tracks the performance of 500 large U.S. companies, or the FTSE 100, which tracks the top 100 companies in the UK. Indices provide an overall snapshot of how a market or industry is performing, making them valuable for investors and traders as a benchmark for comparison or an investment vehicle itself through index funds or ETFs.
Index components are the individual securities that make up a financial index. For example, the components of the Nasdaq index include companies like Apple, Microsoft, and Amazon. These companies are part of the index because they are among the largest and most significant players in their respective sectors. The performance of the index depends on the weighted performance of its components, with more significant companies typically having a greater influence on the overall index. The number and selection criteria for index components can vary, but they usually reflect the most prominent and influential assets in the market or sector the index tracks.
Indices trading involves speculating on the price movements of a financial index, such as the S&P 500, Dow Jones, or NASDAQ. Traders can buy or sell contracts that track the performance of these indices, aiming to profit from market fluctuations. Index trading is typically done via CFDs (Contract for Differences) or futures contracts, which allow traders to take positions on the price movements of indices without owning the underlying assets. This type of trading is popular because it provides exposure to a broad market or sector, rather than individual stocks, allowing traders to diversify their positions while managing risk.
Inflation refers to the general increase in the price level of goods and services within an economy over time, leading to a decrease in the purchasing power of money. It is commonly measured by tracking changes in the cost of a basket of goods and services. Inflation erodes the value of money, meaning that consumers can purchase fewer goods with the same amount of money. Central banks often monitor inflation closely and use tools like interest rate adjustments to keep inflation within a target range. Moderate inflation is generally seen as a sign of a growing economy, but runaway inflation can harm the economy and reduce the standard of living.
The initial margin requirement refers to the minimum amount of capital that a trader must deposit to open a leveraged position in a market. It is typically represented as a percentage of the total position size. For example, in forex trading, a trader might need to deposit 10% of the total value of their position as margin. The margin allows traders to control larger positions with a smaller capital outlay, but it also increases the risk, as losses can exceed the initial margin deposit. Brokers require this deposit to ensure that traders have sufficient funds to cover potential losses.
Interbank rates are the interest rates at which banks lend to one another in the short-term, typically for overnight loans or other short maturities. These rates are used as the basis for determining the interest rates that banks charge their customers for loans and mortgages. Interbank rates fluctuate based on market conditions, the demand for capital, and the central bank’s monetary policy. A common interbank rate is LIBOR (London Interbank Offered Rate), which has historically been a reference for global financial markets, although it is gradually being replaced by other benchmarks like SOFR (Secured Overnight Financing Rate).
Interest rates represent the cost of borrowing money, usually expressed as a percentage of the amount borrowed. It is the fee that a lender charges a borrower for the use of funds, typically paid as an annual percentage of the principal loan amount (referred to as the annual percentage rate or APR). Interest rates can vary depending on the type of loan, the term length, and the risk involved. For investors and traders, interest rates are crucial because they affect the cost of borrowing, the returns on investments, and the economic environment in which they operate. Higher interest rates generally discourage borrowing and spending, while lower rates stimulate economic activity.
In the context of financial markets, intervention refers to the actions taken by a central bank or government to influence the value of its currency or the direction of its financial markets. Currency interventions are often conducted by buying or selling the national currency in the forex market to stabilize or alter its value. Such interventions are typically implemented when the currency is experiencing excessive volatility or when its value is seen as harmful to the broader economy. Central banks may also intervene to achieve broader economic objectives, such as controlling inflation or supporting economic growth.
Intrinsic value refers to the perceived or true value of an asset based on its fundamental characteristics, rather than its current market price. It represents what an asset is worth in its core, taking into account factors like future earnings, growth potential, and economic conditions. In the context of options, intrinsic value is the amount by which an option is in the money, meaning it has a positive difference between the underlying asset’s price and the option’s strike price. Intrinsic value is a key concept in fundamental analysis, as investors use it to evaluate stocks, bonds, or other assets to determine whether they are overvalued or undervalued in the market.
An Inverted Hammer candle is a candlestick pattern that occurs at the top of an uptrend and signals a potential reversal. It looks like an upside-down version of the Hammer candle, with a small body at the bottom and a long upper wick. This pattern suggests that the price surged upwards during the session but was unable to maintain that momentum, indicating that the buyers may be losing control. It is often used to predict the end of an uptrend and the start of a downtrend.
INX is the ticker symbol for the S&P 500 Index, one of the most widely followed stock market indices in the world. It tracks the performance of 500 of the largest publicly traded companies in the U.S., representing a broad cross-section of the U.S. economy. The S&P 500 is used by investors to gauge the health of the U.S. stock market and to compare the performance of individual stocks or investment portfolios. Because the index includes companies from various sectors, it provides a balanced view of the U.S. economy, making it an essential benchmark for both traders and long-term investors.
An Initial Public Offering (IPO) is the process by which a private company offers its shares to the public for the first time, transitioning from private to public ownership. This is often referred to as “going public.” The IPO allows the company to raise capital by selling shares to investors, which can then be traded on a stock exchange. The decision to go public is a significant step for a company, as it opens up access to a broader pool of investors but also requires increased transparency, regulatory compliance, and public scrutiny. For traders and investors, IPOs can present opportunities for profit, but they also carry risks, as the initial price may fluctuate significantly after the offering.
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JPN225, commonly known as the Nikkei 225, is a stock market index that tracks the performance of the 225 largest publicly traded companies on the Tokyo Stock Exchange. It is a price-weighted index that has been calculated daily since 1950 by Nihon Keizai Shimbun, Japan’s leading financial newspaper. The Nikkei is known for its volatility and is influenced by movements in the Japanese Yen. A weaker Yen often leads to higher Nikkei prices, as Japanese exports become more competitive internationally.
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“Kiwi” is a colloquial term for the New Zealand Dollar (NZD), commonly used in the forex market. The term originates from the kiwi bird, a flightless bird native to New Zealand, which is featured on the country’s $1 coin. The NZD is often referred to as the “Kiwi” in forex pairs involving the New Zealand Dollar, such as NZD/USD. Traders use this nickname to discuss currency movements involving the New Zealand economy or when referring to market conditions related to the NZD. It’s one of the more widely recognized currency nicknames, reflecting both the country’s cultural identity and its role in the global economy.
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A level refers to a specific price zone or point on a chart that holds significance in technical analysis. It may indicate strong support, resistance, or areas of increased buying or selling interest.
Leverage is a trading mechanism that allows traders to gain increased exposure to financial markets without committing the full value of a trade upfront. By using leverage, traders can control larger positions with a smaller capital investment, amplifying both potential profits and risks. Leverage is expressed as a ratio, such as 10:1 or 100:1, indicating how much a position is magnified relative to the trader’s actual capital. While leverage can enhance returns, it also increases the likelihood of significant losses, making risk management essential.
Leveraged products are financial instruments that enable traders to open larger market positions with a smaller initial investment. These products, such as contracts for difference (CFDs), futures, and options, use borrowed funds or margin to magnify exposure. While leveraged products can enhance gains, they also increase risk, as losses can exceed the original capital invested. Traders must manage their leverage carefully to avoid significant drawdowns.
Liabilities are financial obligations that individuals or businesses must pay. They appear on balance sheets as amounts owed to creditors, such as loans, mortgages, bonds, accounts payable, and other debts. Liabilities are categorized as either current liabilities, which are due within a year, or non-current liabilities, which have longer repayment periods.
LIBOR (London Interbank Offered Rate)
LIBOR was one of the most widely used global benchmark interest rates, determining the cost of borrowing for banks and influencing trillions of dollars in loans, derivatives, and financial products. It was calculated based on interbank lending rates submitted by major banks. LIBOR has been phased out and replaced with alternative reference rates such as SOFR (Secured Overnight Financing Rate).
A limit order is a pre-set instruction to execute a trade at a specific price that is more favorable than the current market price. A buy limit order is placed below the current market price, ensuring the asset is purchased only when it reaches the desired level. A sell limit order is placed above the market price, executing only when the asset rises to the specified level. Limit orders provide control over trade execution but may not always be filled if the market does not reach the target price.
Liquidation can refer to either closing a trading position or the process of selling a company’s assets when it ceases operations. In trading, liquidation happens when an asset is sold to exit a position, either voluntarily or due to margin requirements. If a company undergoes liquidation, its assets are used to pay off creditors before shareholders receive any remaining funds.
Liquidity refers to how easily an asset can be bought or sold in the market without significantly impacting its price. A highly liquid market has a large number of buyers and sellers, resulting in narrow bid-ask spreads and smooth trade execution. Stocks, major forex pairs, and government bonds typically have high liquidity, while assets with lower trading volume, such as small-cap stocks or exotic currency pairs, may have lower liquidity and wider spreads. Market liquidity is a key factor in determining trade execution speed and price stability.
The London session is one of the three major forex trading sessions, alongside the New York and Tokyo sessions. It runs from 7:30 AM to 3:30 PM GMT and is known for its high trading volume and volatility. The London session overlaps with the New York session for several hours, creating some of the most active trading conditions in the forex market.
A long position, or “going long,” refers to a trade where a trader buys an asset with the expectation that its price will increase. Long positions generate profit when the market moves upward. In forex and stock trading, taking a long position means purchasing a currency pair or stock with the intention of selling it later at a higher price. Long positions contrast with short positions, where traders profit from falling prices.
Loonie is the nickname for the Canadian dollar (CAD), originating from the loon bird depicted on the country’s one-dollar coin. It is one of the most actively traded currencies in forex markets, often influenced by oil prices due to Canada’s strong energy sector.
A lot is a standardized quantity of an asset that is traded as a single unit in financial markets. In forex trading, a standard lot represents 100,000 units of the base currency, while mini lots (10,000 units) and micro lots (1,000 units) provide smaller trading options. In stock and commodity markets, lot sizes vary depending on the asset being traded. Standardized lot sizes help maintain market order and liquidity.
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M2 is a measure of the money supply that includes everything in M1 (physical currency, demand deposits, and checking accounts) as well as savings accounts, money market accounts, retail mutual funds, and time deposits under $100,000. It provides a broader view of the money circulating in the economy, which can be useful for understanding inflation, economic growth, and the central bank’s policy decisions. M2 is an important indicator for economists and traders as it can signal trends in consumer spending and investment behavior.
MACD (Moving Average Convergence Divergence)
The MACD is a technical analysis tool that measures the difference between two moving averages of an asset’s price—typically the 12-day and 26-day exponential moving averages (EMAs). The MACD helps traders identify momentum, trend direction, and potential buy or sell signals. When the MACD line crosses above the signal line, it’s considered a bullish signal, and when it crosses below the signal line, it signals a potential bearish trend. The MACD is widely used to confirm trends and provide insights into potential trend reversals.
A macro trader is an investor who seeks to profit from broad economic trends by analyzing large-scale economic data such as GDP growth, inflation, and unemployment rates. These traders make decisions based on the overall economic and political outlook of different countries, often focusing on the relationships between currencies, commodities, and market sectors. For example, macro traders might identify opportunities in forex trading by correlating currency movements with economic reports or geopolitical events. They rely heavily on macroeconomic indicators to inform their trades and aim to profit from shifts in national and global economic conditions.
Maintenance margin is the minimum amount of equity a trader must maintain in their margin account to keep a leveraged position open. If the equity in the account falls below this level, the trader will receive a margin call from the broker, requiring additional funds to be deposited to maintain the position. This level is typically set by the broker and is crucial for managing risk in leveraged trading. The maintenance margin ensures that traders have enough funds in their accounts to cover potential losses.
A margin call occurs when the balance in a trader’s margin account falls below the required maintenance margin. The broker then demands that the trader deposits additional funds to bring the account back to the required level. If the trader fails to meet the margin call, the broker has the right to liquidate the trader’s positions to cover the shortfall. Margin calls are an important risk management tool for brokers and serve as a safeguard to prevent traders from losing more than they can afford.
Margin is the amount of capital a trader must deposit with a broker to open a leveraged position. It acts as a security deposit for the broker, ensuring that the trader can cover potential losses. When trading on margin, traders can control larger positions than their initial investment by borrowing money from the broker. Margin allows traders to amplify their potential returns, but it also increases the risk of losses if the market moves against their position.
A margin deposit, also known as initial margin, is the amount of money a trader must put up in order to open a leveraged position. This deposit acts as collateral for the loan the broker provides to control a larger position than the trader’s deposit. The margin deposit is usually a percentage of the total value of the trade and varies depending on the asset being traded and the broker’s requirements. Traders must ensure they maintain enough margin in their account to avoid margin calls and the forced closure of positions.
Market capitalisation, often referred to as market cap, is the total market value of a company’s outstanding shares of stock, calculated by multiplying the share price by the number of shares in circulation. It’s a quick way for investors to assess the size of a company and its relative value within the stock market. Market capitalisation is often used to categorize companies into different segments, such as large-cap, mid-cap, and small-cap, each of which has different investment risk and return profiles.
Market data refers to the live information related to the trading of financial assets, such as stock prices, bid and ask quotes, trading volume, and other relevant data. This data is crucial for traders to analyze market conditions and make informed trading decisions. Market data can be obtained from exchanges, financial news platforms, and trading software, providing real-time updates on assets like stocks, indices, commodities, and currencies. Timely and accurate market data helps traders spot trends and potential trading opportunities.
A market maker is a firm or individual that actively buys and sells large amounts of a particular asset in order to provide liquidity to the market. Market makers help ensure that there is enough supply and demand for assets, allowing traders to buy or sell without major delays. They profit by creating a spread between the buying and selling price of an asset. In financial markets, market makers are essential for maintaining smooth and efficient trading, particularly in less liquid markets.
A market order is an instruction from a trader to buy or sell an asset at the current best available price. This type of order guarantees that the trade will be executed immediately, but the price at which the trade is filled can fluctuate based on market conditions. Market orders are typically used when traders want to quickly enter or exit a position, and the priority is speed of execution rather than price precision. However, in volatile markets, market orders can result in slippage, where the execution price is different from the expected price.
Market value is the price at which an asset or company can be bought or sold in the market. It is determined by the forces of supply and demand, reflecting the price at which buyers and sellers agree to make a transaction. In contrast, book value represents the value of a company’s assets as recorded in its financial statements, subtracting liabilities. Market value is often used to assess the current value of a company or asset, and it can fluctuate based on market conditions, investor sentiment, and broader economic factors.
MOM stands for month-over-month, a measurement used to compare a specific data point with the previous month’s value. It is commonly used in economic data analysis, such as comparing inflation rates, unemployment rates, or sales figures from one month to the next. MOM helps analysts assess short-term trends and changes in economic conditions, providing a snapshot of how a variable is evolving over a short period. It’s a useful metric for identifying whether a particular economic indicator is improving or declining month by month.
Momentum trading is a strategy that capitalizes on the strength of an asset’s price movement in a specific direction. Traders employing momentum strategies aim to buy assets that are rising and sell those that are falling, typically relying on technical indicators to identify price acceleration. Momentum traders focus on the rate at which a security’s price changes, using chart patterns, relative strength indices, and volume to gauge the sustainability of a trend. The strategy works best when there is strong momentum in a particular direction, allowing traders to enter at an opportune moment before the trend potentially reverses.
Momentum players are traders who seek to profit from the continuation of a market trend. They focus on identifying assets or markets that are moving quickly in one direction, whether upward or downward, and aim to enter trades that capitalize on the acceleration of those price movements. Momentum players typically target short-term price moves, such as 50-100 pips in forex markets, and rely heavily on technical analysis and chart patterns to determine entry and exit points. These traders benefit from trends that are gaining strength and often use stop-loss orders to limit risk in case the momentum slows or reverses.
A moving average (MA) is a popular technical analysis tool that helps smooth out price data over a specific time period by calculating the average price of an asset. It is used to identify trends, reduce market noise, and predict future price movements. There are different types of moving averages, including simple moving averages (SMA) and exponential moving averages (EMA), each with its own calculation method and emphasis on recent data. Moving averages are widely used by traders to determine entry and exit points, as well as to identify support and resistance levels.
Moving Average Convergence/Divergence (MACD)
The Moving Average Convergence/Divergence (MACD) is a popular technical analysis indicator that helps traders identify changes in the strength, direction, momentum, and duration of a trend in an asset’s price. The MACD uses two moving averages—the 12-day and 26-day exponential moving averages (EMAs)—and calculates the difference between them. When the MACD line crosses above the signal line, it may signal a potential buy opportunity, and when it crosses below, it may indicate a sell signal. The MACD is widely used to spot potential reversals and trends in the market.
The multiplier effect refers to the concept in economics that describes how an initial change in economic activity, such as an increase in government spending or investment, can lead to a larger overall impact on the economy. When money is spent, it circulates through the economy, triggering further spending by businesses and individuals. For example, if a government builds a new infrastructure project, it creates jobs and stimulates spending in the local economy, which, in turn, leads to additional economic activity. Traders often consider the multiplier effect when analyzing economic policies and market conditions that can influence asset prices.
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Net change refers to the difference between an asset’s closing price in the current trading session and its closing price in the previous session. A positive net change indicates a price increase, while a negative net change signals a decline. Traders and analysts use net change to assess daily market trends and overall price movements in stocks, commodities, forex, and other financial instruments.
Net position refers to the total value of all open trades, taking into account both profits and losses. It can also describe whether a trader is net long or net short. If the total value of open long positions exceeds that of short positions, the trader is net long. Conversely, if short positions outweigh long positions, the trader is net short.
The New York trading session runs from 8:00 AM to 5:00 PM Eastern Time and is one of the most active forex trading sessions. It overlaps with the London session for several hours, leading to increased liquidity and volatility. The first 45 minutes of the New York session are often characterized by high market movement as traders react to economic news and data releases.
A no-touch option is a type of binary option in which a trader selects a strike price above or below the current market price. To make a profit, the asset’s price must not reach the strike price before the option’s expiration. This strategy is used by traders who anticipate low market volatility.
Non-current assets are long-term investments owned by a company that are not expected to be converted into cash within a single accounting year. These assets include physical assets such as real estate, machinery, and equipment, as well as intangible assets like patents, trademarks, and goodwill. Unlike current assets, which are liquid and used for daily operations, non-current assets contribute to a company’s long-term growth and stability.
Non-farm payrolls (NFP) is a key economic indicator released monthly by the U.S. Bureau of Labor Statistics. It measures the number of jobs added or lost in the economy, excluding farm workers, government employees, private households, and nonprofit organizations. NFP data has a significant impact on financial markets, particularly forex, as it influences expectations about U.S. economic growth, inflation, and Federal Reserve policy decisions. Strong NFP figures often signal economic expansion, while weak data can indicate slowing growth or recession risks.
NYA.X is the ticker symbol for the NYSE Composite Index, which tracks the performance of all stocks listed on the New York Stock Exchange.
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An “off-book” trade refers to transactions that occur outside of formal exchanges or regulated bodies, typically via the over-the-counter (OTC) market. These trades are not listed on official order books and are made directly between two parties. Off-book trading can be used for large institutional transactions, where privacy and flexibility are important. While off-book trades can offer advantages like better pricing or confidentiality, they also carry increased risks due to the lack of regulatory oversight and transparency.
An offer in trading refers to the intention or proposal of one trader to buy an asset or financial instrument from another trader or institution. It represents the price at which a trader is willing to buy a security. Offers are typically made when a trader is looking to initiate a purchase and are often used in contrast with a “bid,” which is the price at which a trader is willing to sell. In a market, offers and bids interact to facilitate transactions between buyers and sellers.
“On exchange” refers to trades that occur on a formal exchange or regulated marketplace, where assets are bought and sold through an order book. These transactions are governed by exchange rules, ensuring transparency, liquidity, and a fair price discovery process. Trades executed “on exchange” are typically considered more secure than off-exchange trades, as they are subject to oversight and regulation by the exchange. On-exchange trading is commonly used for stocks, commodities, and other financial instruments.
On-balance volume (OBV) is a technical analysis tool that helps traders predict future price movements based on an asset’s trading volume. The idea behind OBV is that volume precedes price movement; when volume increases, it suggests that the price may soon follow the direction of the volume trend. OBV adds or subtracts the trading volume from a cumulative total based on whether the price closed higher or lower than the previous period. OBV is mainly used in stock trading, as the volume of trades has a significant impact on share prices.
One Cancels the Other Order (OCO)
A one-cancels-the-other (OCO) order consists of two linked orders placed simultaneously. If one order is executed, the other is automatically canceled. This strategy is used when a trader expects a major price move but is unsure of the direction. By placing both buy and sell orders at different levels, the trader ensures participation in the market while managing risk.
A one-touch option is a type of binary option where the price of the asset must reach a predetermined strike price at least once before the expiration date for the trade to be profitable. This option is used when traders expect a price movement in a particular direction.
OPEC, or the Organisation of the Petroleum Exporting Countries, is a group of 14 oil-producing countries that coordinate their oil production policies to influence global oil prices. Founded in 1960, OPEC includes nations like Saudi Arabia, Iraq, and Iran, among others. The organization’s primary goal is to stabilize oil markets, ensure a steady supply of oil to consumers, and secure a fair return on oil investments for producers. OPEC’s decisions on oil production levels can have a major impact on global oil prices, making it a key factor in energy trading.
An open order is a pending trade that remains active until it is executed, canceled, or expires. Open orders are not filled immediately, as they are usually limit or stop orders that require specific market conditions to be met before execution.
An open position in trading refers to a trade that is still active and has not yet been closed. These positions can either be long (buying an asset with the expectation that its price will rise) or short (selling an asset with the expectation that its price will fall). Open positions can generate profits or incur losses depending on the market movement. Once a trader decides to close the position, the associated profit or loss is realized, and the trade is no longer active.
An option is a type of financial instrument that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (strike price) within a specified time frame. Options are commonly used as a hedge against market movements or for speculative purposes. There are two types of options: call options (which give the right to buy) and put options (which give the right to sell). The value of an option depends on various factors, including the price of the underlying asset, time to expiration, and market volatility.
An option spread involves combining multiple options contracts in a single trade to reduce risk or to profit from certain market conditions. There are three primary types of option spreads: vertical spreads, horizontal spreads, and diagonal spreads. A vertical spread involves buying and selling options of the same type (call or put) and expiration date but at different strike prices. A horizontal spread involves options with the same strike price but different expiration dates, while a diagonal spread involves different strike prices and expiration dates. Option spreads are popular strategies for traders seeking to limit potential losses while taking advantage of small price movements.
In trading, an order is an instruction given by a trader to a broker or trading platform to execute a transaction on a financial instrument, such as buying or selling stocks, commodities, or currencies. There are different types of orders, including market orders (executed at the best available price) and limit orders (executed only at a specified price or better). Orders are essential for initiating and completing trades, and they allow traders to manage their positions effectively.
An order book is a list of buy and sell orders for a particular asset or financial instrument, organized by price level. It is maintained by brokers or exchanges to show the supply and demand for the asset at any given time. The order book helps traders see the available orders, allowing them to make informed decisions on whether to buy or sell at specific prices. The order book is critical for facilitating price discovery, as it reflects the current market sentiment and the liquidity of the asset.
OTC (over-the-counter) trading refers to transactions that occur outside formal exchanges. In OTC trading, buyers and sellers negotiate directly, often with the help of a broker, rather than executing trades through an exchange. OTC trading is common for assets that are not listed on exchanges, such as certain stocks, bonds, and derivatives. While OTC trading can offer more flexibility and privacy, it also carries higher risks due to the lack of oversight and regulatory standards compared to exchange-based trading.
Overexposure in trading refers to taking on more risk than a trader can comfortably manage, often by investing too much capital in a single position or asset. This can occur when a trader ignores proper risk management principles and fails to diversify their portfolio. Overexposure can lead to significant losses if the market moves against the trader’s position. It is important for traders to carefully assess their risk tolerance and use tools like stop-loss orders and position sizing to prevent overexposure.
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P/E Ratio (Price-to-Earnings Ratio)
The price-to-earnings (P/E) ratio is a financial metric used to evaluate a company’s valuation by comparing its stock price to its earnings per share (EPS). It is calculated by dividing the market value per share by the EPS. A high P/E ratio may indicate that a stock is overvalued or that investors expect strong future growth, while a low P/E ratio can suggest undervaluation or weak growth expectations. The P/E ratio is widely used by investors to assess a company’s profitability and compare it to industry peers.
A parent company is a business entity that owns a controlling interest in one or more subsidiary companies. This control allows the parent company to influence or directly manage the subsidiary’s operations, financial decisions, and strategic direction. Some parent companies actively oversee their subsidiaries, while others take a hands-off approach, allowing them to operate independently. Parent companies often structure their businesses this way for legal, financial, or operational advantages.
A partial fill occurs when only a portion of a trader’s limit order is executed before the price moves away from the specified level. This happens when there is not enough liquidity to fill the entire order at the requested price. For example, if a trader places an order to buy 500 shares at $50, but only 20 shares are available at that price before the market moves higher, the order is partially filled, leaving the remaining 480 shares unexecuted.
Physical settlement is a method of fulfilling a derivatives contract where the actual underlying asset is delivered upon expiration, rather than settling in cash. In the case of a call option, the seller must deliver the asset to the buyer. In a put option, the seller must purchase the asset from the buyer at the agreed strike price. Physical settlement is common in commodities and certain stock options.
A pip is the smallest price movement in forex trading, representing a change of 0.0001 in most currency pairs. For example, if EUR/USD moves from 1.1050 to 1.1051, it has increased by one pip. In some currency pairs, such as USD/JPY, a pip is measured at the second decimal place. Pips are essential for calculating price changes, spreads, and trade profits in forex trading.
Pip value refers to the monetary worth of a single pip movement in a forex trade. It depends on the currency pair being traded, the lot size, and the account currency. Traders use pip value to calculate potential profits and losses, ensuring they manage risk effectively when opening positions.
Power of attorney (POA) is a legal authorization that allows one person to act on behalf of another. In trading, POA enables a designated individual to manage and execute trades on another person’s behalf, often used in managed trading accounts. The level of control granted varies based on the type of POA, ranging from limited trading authority to full account management.
A price level is the cost at which goods, services, or financial instruments can be bought or sold. In financial markets, price levels refer to significant points on a price chart where supply or demand influences an asset’s movement.
Price transparency refers to the degree of openness in financial markets, where traders have access to information about bid and ask prices, trading volumes, and market depth. Greater transparency allows market participants to make informed trading decisions. Some exchanges, such as Nasdaq, provide full transparency, while others, like the NYSE, limit access to detailed pricing information.
Profit is the financial gain earned from a business activity or trade after accounting for costs and expenses. It is a key measure of business health and investment performance. The three main types of profit are: Gross profit, which subtracts only the cost of goods sold (COGS), Operating profit, which deducts operating expenses from gross profit, Net profit, which considers all costs, including taxes and interest, to provide the final profitability figure.
Profit and Loss (P&L) Statement
A profit and loss (P&L) statement is a financial report that summarizes a company’s revenues, costs, and expenses over a specific period, typically a quarter or year. The P&L statement shows whether a company has made a profit or incurred a loss and is a key indicator of financial health. Investors and analysts use P&L statements to assess profitability, cost efficiency, and business performance trends.
A pullback is a temporary decline in an asset’s price within an overall upward trend. It represents a short-term dip before the asset resumes its primary direction. Traders use pullbacks to identify potential buying opportunities in strong trends. While often confused with retracements or consolidations, pullbacks differ from reversals, which indicate a more permanent change in trend direction.
Purchasing Managers’ Index (PMI)
The purchasing managers’ index (PMI) is an economic indicator that measures business activity in the manufacturing and services sectors. It is based on surveys of purchasing managers who assess production levels, new orders, inventory, employment, and supplier deliveries. A PMI reading above 50 indicates economic expansion, while a reading below 50 signals contraction. Traders and economists use PMI data to gauge economic health and predict future market trends.
A put option is a financial contract that grants the buyer the right, but not the obligation, to sell an asset at a predetermined price before or on the expiration date. Put options gain value when the market price of the underlying asset declines, making them useful for hedging or speculative trading. Traders use put options to protect investments against potential losses or to profit from bearish market conditions.
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Quantitative easing (QE) is an unconventional monetary policy tool used by central banks to stimulate economic activity when traditional monetary policy tools, such as interest rate cuts, have become less effective. Under QE, a central bank buys long-term securities like government bonds or mortgage-backed securities from the open market to increase the money supply and lower long-term interest rates. This aims to boost spending, investment, and growth in the economy, especially during periods of economic stagnation. While QE can provide a much-needed economic stimulus, it can also lead to inflationary pressures if not carefully managed.
A quote is the price at which an asset is bought or sold at the moment a transaction is completed. It is typically presented as a bid-ask pair, where the bid represents the price a buyer is willing to pay for the asset, and the ask is the price a seller is willing to accept. In forex, the quote refers to the second currency in a currency pair, indicating how much of that currency is needed to purchase one unit of the base currency. For example, if the EUR/USD quote is 1.2000, it means it costs $1.20 to buy €1. A quote is important for traders to assess the cost of entering or exiting positions in the market.
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A rally refers to a period during which the price of an asset experiences sustained upward momentum. Typically, rallies occur after a period of stagnation, where prices have been flat, trading within a narrow range, or have been in decline. Traders often view rallies as opportunities to capitalize on the upward movement of prices, as they can signify a shift in market sentiment or the beginning of a new trend. However, rallies can also be followed by corrections, so it’s important to assess whether the rally is likely to continue or reverse.
Random walk theory is a financial model that suggests stock prices move in an unpredictable and erratic manner. According to this theory, past price movements or trends cannot be used to predict future price movements. Each stock’s future price is assumed to be independent of its past price movements and is not influenced by the price movements of other securities. The theory implies that stock market movements are essentially random, making it difficult to predict future price changes based on historical data. This concept is central to the idea of efficient markets.
Range refers to the difference between the highest and lowest prices of an asset over a specific period. It is often used as a measure of volatility; a larger range typically indicates greater price movement and, thus, higher volatility. Traders use range analysis to assess the level of risk in a market. For example, if the price of an asset is fluctuating widely within a short time, it may suggest an unstable market. Conversely, a narrow range may indicate a more stable or less volatile market.
In Forex trading, the rate is the value of one currency in relation to another. It represents how much of one currency is needed to purchase a unit of another currency. For example, if the EUR/USD exchange rate is 1.2000, it means that one Euro is equivalent to 1.20 US Dollars. Exchange rates fluctuate based on supply and demand for currencies and are affected by factors such as economic data, geopolitical events, and monetary policy. Traders closely monitor exchange rates to make decisions about buying or selling currency pairs and speculate on their future movement.
The rate of return (ROR) is a financial metric that measures the gain or loss on an investment over a certain period, expressed as a percentage of the initial investment. A positive ROR means that the investment has generated a profit, while a negative ROR indicates a loss. The formula for ROR is typically calculated as (Ending Value – Starting Value) / Starting Value × 100. This metric helps investors evaluate the profitability of their investments and compare them to other potential investment opportunities.
RBNZ (Royal Bank of New Zealand)
The Royal Bank of New Zealand (RBNZ) is the central bank of New Zealand, responsible for managing the country’s monetary policy and ensuring financial stability. Its core functions include regulating interest rates, controlling inflation, and promoting a stable financial system. The RBNZ is also tasked with managing the value of the New Zealand Dollar (NZD) and working to ensure sustainable economic growth. Decisions made by the RBNZ, such as interest rate adjustments, have a significant impact on the NZD’s value and New Zealand’s economic performance.
A realized profit or loss occurs when an investment is sold for a higher or lower price than it was originally purchased for. This is the point at which the profit or loss is locked in and can be counted as part of the trader’s or investor’s financial performance. For example, if an investor buys 1000 shares at $5 each and sells them at $8, the realized profit would be $3,000 (1000 shares x $3 profit per share). Conversely, if the shares were sold at a loss, that loss would be considered realized once the position is closed. Realized profits are subject to taxation, unlike unrealized gains, which are not taxed until the position is closed.
A resistance level is a price point at which the upward movement of an asset’s price is halted by a significant level of selling pressure. When the price approaches this level, sellers are more inclined to sell, preventing the price from rising further. Traders often view resistance levels as potential points where price trends might reverse, and they may choose to sell their positions or wait for a breakout above this level. If the price reaches and surpasses the resistance level, it could signal the start of a new upward trend.
A retail investor is an individual, non-professional investor who buys and sells securities for their personal account, typically through brokers or online trading platforms. Retail investors usually invest smaller amounts compared to institutional investors, such as hedge funds or pension funds. With increased access to financial information and trading tools, retail investing has grown significantly in recent years. In 2021, retail investors made up a significant portion of total equity volume in markets like the U.S. Retail investors are often more likely to focus on short-term market movements and trends, although some may pursue long-term investment strategies.
A rights issue is a corporate action in which a company offers its existing shareholders the opportunity to purchase additional shares at a discounted price. This typically occurs when a company needs to raise additional capital, and the discounted price is available for a limited period. Rights issues allow current shareholders to maintain their proportional ownership in the company by giving them the “right” to buy new shares before they are offered to the public. If shareholders choose not to exercise their rights, the new shares are typically offered to others in the market.
Risk refers to the potential for loss in an investment or trading activity due to fluctuations in asset prices, market conditions, or other external factors. In trading, the level of risk often correlates with the potential return—higher risk can result in higher potential profits, but also greater potential losses. Traders must assess risk by considering factors like market volatility, leverage, and their own risk tolerance. Managing risk is crucial to protect investments and maintain long-term profitability. Strategies like diversification, stop-loss orders, and hedging are commonly used to mitigate risk.
The Regulatory News Service (RNS) is a service provided by the London Stock Exchange (LSE) that disseminates regulatory and non-regulatory information on behalf of UK businesses and publicly listed companies. It ensures that companies comply with their disclosure obligations by making important information, such as financial results, company announcements, and regulatory filings, publicly available. The RNS is an essential tool for traders and investors, as it helps them stay informed about the latest developments in the companies they follow.
ROCE (Return on Capital Employed)
Return on Capital Employed (ROCE) is a profitability ratio that measures how effectively a company is utilizing its capital to generate profits. ROCE is calculated by dividing the company’s operating profit (EBIT) by the capital employed (the total assets minus current liabilities). A higher ROCE indicates that a company is using its capital efficiently, generating more profit for each dollar (or other currency) of capital employed. This ratio is particularly useful for comparing the performance of companies within the same industry or sector.
In trading, a rollover refers to the process of extending a position beyond its expiration or settlement date. This is typically done by closing the current contract and simultaneously opening a new one with a later expiration date. Rollovers are commonly used in futures, options, and forex markets, especially when traders wish to maintain a position without liquidating it. In forex, rollover also refers to the interest paid or earned on currency positions held overnight, depending on the interest rate differential between the two currencies involved.
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. It ranges from 0 to 100 and is used to identify whether an asset is overbought or oversold. A reading above 70 typically indicates that the asset is overbought and may be due for a price correction, while a reading below 30 suggests that it is oversold and could be poised for a rebound. RSI is often used in combination with other technical indicators to confirm potential entry or exit points.
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Scalping is a short-term trading strategy that involves opening and closing positions rapidly to profit from small price movements. Traders who use this strategy, known as scalpers, aim to make multiple quick trades throughout the day, taking advantage of minor fluctuations in an asset’s price. Scalping requires fast execution, tight spreads, and a strong risk management strategy due to its high-frequency nature.
SEC (Securities and Exchange Commission)
The SEC is the United States Securities and Exchange Commission, a federal agency responsible for overseeing and regulating financial markets to protect investors and ensure fair and efficient market operations. Established in 1934, the SEC enforces securities laws, ensures public companies disclose financial information, and takes legal action against fraud and market manipulation.
A sector is a grouping of companies within an economy based on shared business activities or industries. Sectors are used to classify economies of all sizes, from a single country to the global economy. Common sectors include technology, finance, healthcare, and energy. Investors often diversify their portfolios across multiple sectors to reduce risk.
Sell refers to the action of opening a trade by selling an asset in anticipation that its price will decrease. This is known as short selling, where a trader profits by repurchasing the asset at a lower price. Selling is the opposite of buying, which involves purchasing an asset with the expectation that its price will rise.
Settlement is the process of completing a trade, where the buyer receives the asset and the seller receives payment. In financial markets, settlement can occur in two forms: cash settlement, where the trade is closed with a monetary payment, or physical settlement, where the actual asset is delivered.
A share buyback, also known as a share repurchase, occurs when a company buys back its own shares from investors. This process reduces the number of shares in circulation, potentially increasing the stock’s value and earnings per share. Companies may repurchase shares as an alternative to paying dividends, to signal confidence in their financial position, or to prevent stock dilution. Shares repurchased can be canceled or held for future redistribution.
A share price, also called a stock price, is the amount it costs to buy one share of a publicly traded company. Share prices fluctuate based on supply and demand, company performance, investor sentiment, and broader market conditions. A company’s stock price is a key indicator of its perceived value, with higher prices often reflecting strong earnings and growth prospects.
Shares represent units of ownership in a company and are commonly traded on stock markets. Holding shares entitles investors to a portion of the company’s profits, which may be distributed as dividends. Shares are also referred to as stocks or equities and can be classified into different types, such as common shares and preferred shares.
Shares trading refers to the buying and selling of stocks with the aim of making a profit. Traders can invest in shares directly on exchanges or trade derivatives based on stock prices, such as contracts for difference (CFDs) or options. Share trading strategies vary from long-term investing to short-term trading approaches like swing trading and day trading.
SHGA.X is the ticker symbol for the Shanghai A Index, which tracks A-shares listed on the Shanghai Stock Exchange.
A short position, or “going short,” is a trading strategy where a trader sells an asset they do not own, aiming to buy it back at a lower price for a profit. Short selling is used when a trader expects an asset’s price to decline. This strategy carries significant risk, as losses can be unlimited if the asset’s price rises instead of falling.
Short-covering is the process of closing a short position by buying back the asset that was initially sold. Traders engage in short-covering to lock in profits when the asset’s price declines or to prevent further losses if the price rises.
Short selling involves borrowing an asset, selling it at the current market price, and then repurchasing it later at a lower price to return it to the lender. The trader profits from the difference between the selling and buying price. Short selling is commonly used in stock, forex, and commodity markets but can be risky, as unexpected price increases can lead to large losses.
A short squeeze occurs when a heavily shorted asset experiences a sudden price increase, forcing short sellers to buy back the asset to limit their losses. This buying pressure drives the price even higher, creating a rapid upward spike.
Shorts refer to traders who have taken short positions in the market or are generally bearish on an asset’s price movement.
Slippage occurs when a trade is executed at a different price than expected due to rapid market movements or low liquidity. It typically happens in volatile markets or during periods of high trading activity. Slippage can be positive (executed at a better price) or negative (executed at a worse price), affecting both market and stop orders.
A smart order router (SOR) is an automated trading system that searches multiple exchanges or liquidity providers to find the best available price for executing a trade. SOR technology helps traders achieve optimal execution, reduce trading costs, and improve efficiency by directing orders to the most favorable venues.
The SNB is the central bank of Switzerland, responsible for monetary policy and the issuance of the Swiss franc. It is known for maintaining financial stability and holding significant gold reserves.
Socially Responsible Investing (SRI)
Socially responsible investing (SRI) is an investment strategy that considers both financial returns and ethical, social, or environmental impact. Investors following SRI principles avoid companies involved in industries such as tobacco, weapons, or fossil fuels and instead focus on businesses that promote sustainability, social justice, and corporate responsibility. SRI is closely linked to impact investing and environmental, social, and governance (ESG) criteria.
In trading, the spot price refers to the current market price of an asset for immediate delivery and settlement. The spot market differs from the futures market, where prices are agreed upon for delivery at a later date. Spot prices fluctuate in real time based on supply and demand, and they are commonly used in forex, commodities, and cryptocurrency trading.
The spread is the difference between the bid (buy) and ask (sell) price of an asset. A narrow spread typically indicates high market liquidity and tight competition among buyers and sellers, while a wide spread suggests lower liquidity and higher trading costs. In forex and CFD trading, spreads are a key cost factor, as brokers often earn profits from the spread rather than charging commissions.
SPX500 is another name for the S&P 500 Index, which tracks the performance of 500 of the largest publicly traded companies in the US.
Sterling is the term used for the British pound (GBP), the official currency of the United Kingdom. It is one of the most traded currencies in the world.
Stock analysis is the process of evaluating stocks to determine their potential for price movements and investment opportunities. Traders use two main types of stock analysis: fundamental analysis, which examines financial statements, earnings, and economic factors, and technical analysis, which focuses on price charts, trends, and indicators. Stock analysis helps traders and investors make informed decisions about buying and selling shares.
A stock exchange is a centralized marketplace where shares of publicly traded companies are bought and sold. Stock exchanges, such as the New York Stock Exchange (NYSE) and London Stock Exchange (LSE), provide transparency, liquidity, and regulation for stock trading. They facilitate price discovery, allowing investors to access publicly listed stocks.
A stock index is a collection of selected stocks that represent the performance of a particular sector, exchange, or economy. Major stock indices include the S&P 500, Dow Jones Industrial Average (DJIA), and FTSE 100. Indices serve as benchmarks for market trends and investor sentiment, and they can be traded using index funds, exchange-traded funds (ETFs), or index derivatives.
A stock split occurs when a company divides its existing shares into multiple new shares to lower the trading price of each share, making it more accessible to a broader base of investors. For example, in a 2-for-1 stock split, shareholders receive two shares for every one share they own, but the value of each share is halved. Stock splits increase the float, allowing for more shares to be traded. In contrast, a reverse stock split consolidates shares and increases the price per share, often used by companies with declining stock prices to meet listing requirements.
A stock symbol is a unique abbreviation assigned to a publicly traded company on a stock exchange. Investors use stock symbols to identify and trade company shares. For example, Apple Inc. is represented by the symbol AAPL on the NASDAQ exchange. Stock symbols can vary across exchanges but typically consist of a few letters.
Stockbroking is the service of buying and selling stocks on behalf of investors. A stockbroker is a licensed professional or firm that facilitates trades, provides market insights, and offers investment advice. Some brokers operate as full-service firms with personalized guidance, while others are discount brokers that provide low-cost trading platforms for self-directed investors.
Stop-loss hunting occurs when large market participants drive the price to trigger stop-loss orders, creating a sharp price movement that can lead to increased volatility.
A stop order is a trade order that executes once the asset reaches a predetermined price level, which is less favorable than the current market price. Stop orders help traders manage risk by automatically triggering a buy or sell order when an asset moves beyond a specific price. Stop-loss orders are commonly used to limit potential losses in volatile markets.
A straddle is an options trading strategy that allows traders to profit from volatility without predicting the direction of price movement. It involves simultaneously buying or selling a call option and a put option with the same strike price and expiration date. A straddle benefits from significant price swings, regardless of whether the asset moves up or down.
The strike price is the fixed price at which an option contract can be exercised. In a call option, the strike price is the price at which the buyer can purchase the underlying asset, while in a put option, it is the price at which the asset can be sold. The difference between the strike price and the market price determines whether an option is in the money, at the money, or out of the money.
Support is a price level where an asset tends to find buying interest, preventing further declines. It is a key concept in technical analysis.
Support levels are specific price points where an asset historically experiences buying pressure, preventing it from falling further.
Suspended trading occurs when trading in a security is temporarily halted due to regulatory concerns, market volatility, or company-specific news.
A swap is a financial contract where two parties exchange cash flows or assets. In forex, a swap refers to the interest rate differential between two currencies held overnight.
Swissie is the slang term for the Swiss franc (CHF), the official currency of Switzerland. The term is commonly used in forex trading when referring to the USD/CHF currency pair.
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A Take Profit (T/P) order is a trade order placed to automatically close a position when the asset reaches a pre-defined profit level. By setting this order, traders can lock in profits without having to constantly monitor the market. Take profits help prevent a position from turning into a loss if the market reverses after achieving a gain. This order type reflects confidence in the market movement and ensures that a trader captures profits while they’re available, providing a risk-managed exit from the trade.
A takeover occurs when one company gains control of another by purchasing a majority of its shares. This can happen in the form of a friendly acquisition, where both parties agree, or as a hostile takeover, where the acquiring company proceeds without the target company’s consent. Takeovers are often strategic moves by larger companies to expand their market share, access new technologies, or eliminate competition. Once the takeover is complete, the acquiring company typically integrates the target company into its operations.
Technical analysis is a method used to evaluate and predict price movements in the financial markets by analyzing historical price charts and market data. This approach is based on the belief that market prices move in trends, and by identifying past patterns and trends, traders can forecast future price movements. Key tools in technical analysis include various chart patterns, indicators, and oscillators. Traders use these to spot potential buy and sell signals, aiming to capitalize on short-term market fluctuations. Unlike fundamental analysis, which focuses on the financial health of a company or economy, technical analysis centers on price action and market sentiment.
The Tokyo session refers to the trading hours of the Asian market, which runs from 09:00 to 18:00 Japan Standard Time (JST). It is one of the three major forex trading sessions, alongside the London and New York sessions. The Tokyo session is highly active in forex trading, particularly in currency pairs involving the Japanese Yen (JPY). Market movements during this session are often influenced by economic data releases from Japan and other Asian markets.
Tom-next, short for “tomorrow-next day,” is a type of short-term forex transaction that allows traders to simultaneously buy and sell a currency over two separate business days: tomorrow and the next day. This type of transaction is used by forex traders to manage short-term liquidity needs or to avoid currency risk that could arise from holding a position overnight. Tom-next deals typically have a very short duration, often involving minimal price movement. The transaction helps traders take advantage of minor currency fluctuations and roll over positions without facing overnight risks.
A trade confirmation is a document sent by a broker to a trader confirming that a trade has been successfully executed. It includes key details such as the trade date, asset, quantity, price, and any associated fees or commissions. Trade confirmations serve as proof of the transaction and can be used for record-keeping, tax purposes, and resolving disputes. They help ensure transparency and accuracy in the execution of trades and can be cross-referenced with account statements.
Trade size refers to the number of units of an asset or security involved in a trade or transaction. In forex, it is often referred to as the “lot size,” which can be a standard lot, mini lot, or micro lot, depending on the amount of the currency being traded. The size of the trade impacts the risk and potential return, as larger trades expose the trader to more significant market movements. Understanding trade size is crucial for risk management and position sizing in any trading strategy.
A trading halt is a temporary suspension of trading in a security, typically imposed by an exchange or regulatory authority. This halt can occur due to significant news announcements, technical issues, or regulatory concerns. A trading halt differs from a suspension, which is a more permanent action, and can help maintain market stability by giving traders time to digest new information or correct any issues with market infrastructure.
A trailing step refers to the adjustment in the level of a stop-loss order that follows the asset’s price as it moves in the trader’s favor. It is a part of the trailing stop strategy, designed to protect profits while allowing the position to continue benefiting from favorable market moves. The trailing step is the specific increment by which the stop-loss level moves when the price moves in the trader’s favor. This helps lock in profits by allowing the stop-loss to “trail” behind the asset’s price, but without being too tight to close the position prematurely due to normal market fluctuations.
A trailing stop is a type of stop-loss order that automatically adjusts to lock in profits as the market moves in your favor. If the price of an asset rises, the trailing stop will move up to secure some of the profits, but if the price reverses, the stop-loss remains at its last favorable position. This strategy allows traders to protect profits while leaving room for the position to grow if the trend continues. Trailing stops are useful in volatile markets because they help secure profits while preventing losses if the market turns against the trader. They are often used to ride the momentum of a trend without having to constantly adjust the stop-loss manually.
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The UK Producer Price Index (PPI) measures the change in the cost of goods purchased and sold by UK manufacturers. It serves as a leading indicator of inflation, as increases in producer prices often lead to higher consumer prices.
UK100 refers to the FTSE 100 index, which tracks the 100 largest companies listed on the London Stock Exchange by market capitalization.
Unborrowable stock refers to shares that are unavailable for short selling due to a lack of availability to borrow. Short selling relies on borrowing shares to sell them in anticipation of a price decline. However, when a stock becomes unborrowable, either due to low availability or reluctance by lenders to provide shares, traders are unable to short the stock. This situation often occurs with stocks that have a high demand for borrowing, particularly those with limited float or significant short interest.
Underlying refers to the actual market or asset from which a derivative product derives its price. In options and futures trading, the underlying asset determines the contract’s value.
The unemployment rate is the percentage of the labor force that is unemployed but actively seeking work. It is a key indicator of economic health, with rising unemployment often signaling economic weakness.
Unrealized gains or losses represent the potential profit or loss on open trading positions based on current market prices. These gains or losses only become realized when the position is closed.
An uptick occurs when an asset’s latest price quote is higher than the previous quote. It indicates that buyers are actively purchasing the asset and pushing its price upward.
The uptick rule is a regulation that restricts short selling of a security unless the previous trade was executed at a lower price than the current trade. It aims to prevent excessive downward pressure on a stock.
US Oil refers to West Texas Intermediate (WTI) Crude Oil, which serves as the benchmark for oil prices in North America. It is traded on the New York Mercantile Exchange (NYMEX).
The US prime rate is the short-term interest rate banks charge their most creditworthy customers. It serves as a benchmark for setting rates on loans and credit cards.
V
Value at Risk (VaR) is a statistical measure used to assess the potential loss in value of a portfolio or asset over a defined period for a given confidence interval. It is commonly used by financial institutions and traders to quantify the risk of a portfolio. For example, if a portfolio has a 1-day VaR of $1 million at a 95% confidence level, it means there is a 5% chance that the portfolio could lose more than $1 million in one day. VaR is widely used to understand potential losses under normal market conditions, but it doesn’t account for extreme events, which can lead to losses beyond the predicted risk.
The value date is the settlement date when funds or assets are exchanged in a financial transaction. In forex trading, the value date is typically two business days after a trade is executed.
Variable cost refers to business expenses that change in direct proportion to the level of goods or services a company produces. As a company increases production, variable costs—such as raw materials, labor, and utility costs—tend to rise. Conversely, when production decreases, variable costs will also decline. Understanding variable costs is essential for businesses to assess profitability, particularly when considering scaling production. Traders often look at variable costs when evaluating a company’s operating efficiency and potential profitability.
The VIX, or Chicago Board Options Exchange Volatility Index, is a popular measure of market volatility that tracks the expected price fluctuations in the S&P 500 index over the next 30 days. Often referred to as the “fear gauge,” the VIX is a reflection of investor sentiment, with higher values indicating greater market uncertainty or risk. Traders use the VIX to gauge overall market sentiment and volatility expectations, making it a useful tool for managing risk and making informed trading decisions.
Volatility in financial markets refers to the frequency and magnitude of price movements within a specific time period. A volatile market is one where prices can change rapidly and unpredictably, often creating opportunities for traders but also increasing risk. Volatility is commonly measured using indicators like the VIX or the average true range (ATR). It plays a significant role in options pricing and risk management strategies, as assets with higher volatility can lead to larger gains or losses.
In trading, volume refers to the total amount of an asset being traded during a specific period. It is an important indicator of market activity and liquidity, helping traders understand the strength of a price movement. High volume often indicates strong market participation, which can confirm the validity of a trend, while low volume may suggest a lack of conviction or interest in the asset. Volume is often used in conjunction with price movements to provide additional context for trading decisions.
VWAP (Volume-Weighted Average Price)
VWAP, or Volume-Weighted Average Price, is a technical analysis tool used to calculate the average price of an asset, weighted by the volume of trades at each price level. It is commonly used by traders to assess the market’s average price over a specific period, helping them identify whether an asset is being bought or sold at favorable levels. VWAP is particularly useful for large institutional traders looking to minimize market impact and achieve a fair execution price.
W
A wedge chart pattern occurs when price movements narrow within converging trend lines, signaling a potential breakout. An ascending wedge forms when both price highs and lows are rising, typically ending in a bearish breakout. A descending wedge forms when both price highs and lows are declining, often resulting in a bullish breakout.
West Texas Intermediate (WTI) is a type of crude oil used as a benchmark in the commodities market. It is sourced from oil fields in the United States, particularly in Texas, and is known for its light, sweet characteristics, meaning it is low in sulfur and easier to refine. WTI is one of the three main global oil benchmarks, alongside Brent crude and Dubai/Oman. Its price is closely monitored by traders, as it influences global oil prices and serves as a reference point for pricing other oil contracts.
A working order refers to a pending order in a trader’s account that has not yet been executed. It is typically a stop or limit order that is placed to trigger a trade when an asset reaches a specific price. Working orders are designed to enter or exit a position automatically once market conditions meet the trader’s set criteria. For example, a stop order might be set to sell a stock if its price drops to a certain level, helping traders manage risk without constantly monitoring the market.
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Y
Yard is trader slang for one billion units of currency.
Yield is the income generated from an investment, expressed as a percentage of the initial investment or current market value. It is typically represented by interest payments or dividends received from holding financial assets such as bonds or stocks. For example, a bond with an annual coupon of $50 and a market price of $1,000 would have a yield of 5%. Yield is an important metric for traders and investors, as it indicates the return on investment over time and helps assess the income-generating potential of an asset.
The yuan is the base unit of China’s currency, the renminbi (CNY). It is commonly referred to in forex trading as the Chinese yuan (CNY) or offshore yuan (CNH).
Z
The South African Rand (ZAR) is the currency of South Africa. The name is derived from the word ‘Witwatersrand’, which means ‘ridge of white waters’.